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Belt and Road Initiative is a chance for China to deepen reform

The government should create a better business environment to encourage private companies to participate based on their own interests

By NewsChina Updated Jul.1

The Belt and Road Initiative (BRI) has been deemed China’s most important foreign policy project since it was first proposed in 2013. With the conclusion of the high profile Belt and Road Forum for International Cooperation, the initiative has gained new momentum. While the initiative is often perceived as a diplomatic effort, it also has domestic significance. The authorities should take advantage of the opportunity provided by the initiative to push forward a reform agenda, which, in turn, could foster the success of the BRI.  

With its focus on Central Asia, one objective of the BRI is to address China’s own unbalanced regional development, by linking China’s less prosperous inland and western regions to the external market. In a 2015 guideline, the government outlined six domestic “economic corridors” that would be connected to the BRI, which include 18 provinces and regions, 13 of them inland. The far western region of Xinjiang, for example, is identified as the “core” region of the Silk Road economic belt.  

To achieve this goal, China needs to make serious efforts to push forward local reforms in these inland areas. Compared to the prosperous eastern coast, where economic development has nurtured a more efficient and transparent governance structure, the quality of governance in the inland and western regions has lagged far behind.  

As the BRI aims to improve regional integration and connectivity between China and other countries along the Belt and Road, China must first promote internal integration and connectivity between these regions by improving the quality, efficiency and transparency of governance. Given the strong backing of top leadership for the BRI, the government should take the opportunity to tackle these issues in relevant regions. 

Besides regional disparities, the government should also take greater efforts to address the relationship between the State-owned sector and the private sector. It has long been argued that a major problem with China’s economy is the predominant role enjoyed by the State-owned enterprises, as the private sector is excluded from many major industries. The central leadership has previously pledged to push forward market-centered reform, but progress appears to be slow to come. So far, State-owned companies have also played a dominant role in the BRI. But the government must realize that the active participation of the private sector is needed for the BRI to succeed.  

Instead of relying on State-owned enterprises, whose investment decisions are often influenced by political factors, the government should create a better business environment to encourage private companies to participate based on their own interests. Only in this way can the BRI be sustainable and genuinely beneficial to both China and its partners. 

The BRI provides China with a golden chance to kill two birds with one stone by combining its foreign policy, economic and reform agendas. Not only can China create a source of new growth, it could make breakthroughs in its much-desired reform and restructuring to secure a more sustainable future for both China and the world.