After 6-years of rapid development, China’s Belt and Road Initiative (BRI) has entered a new era in terms of quality development. In this grand picture, cities acting as sub-state actors along the BRI, have gained new momentum for displaying geographic significance and economic attractiveness. This paper intends to define cities’ role in the joint promotion of BRI, exemplify how cities will prosper in the process and explore new opportunities of investment after the COVID-19 pandemic.  

 

BRI presents economic opportunities for multi-layered shareholders

The Belt and Road Initiative, which was formally proposed by Chinese President Xi Jinping, provides new motivators for a new round of globalization and China’s economic development in the coming era. As of March 2020, 138 countries have joined the Belt and Road Initiative (BRI) by signing a Memorandum of Understanding (MoU) with China. Trade between BRI partner countries totaled 9.27 trillion yuan (about 1.34 trillion U.S. dollars) in 2019, up 10.8 percent year on year, and outpacing the country's aggregate trade growth by 7.4 percentage points, according to the General Administration of Customs of China (GAC). In the 2014-2019 period, the total trade volume between China and BRI countries surpassed 44 trillion yuan, with an average annual growth of 6.1 percent. China has become the biggest trade partner of 25 of the participating countries, and BRI countries' share of China's total trade approached 30 percent last year, up by 2 percentage points from 2018.^[1] Without a doubt, BRI stands to become one of the most progressive international development projects ever conceived, with projected investments of nearly US$1 trillion. It has already led to and will continue to create significant investment opportunities for regions, countries, companies and cities.

 

Empowerment of Cities along the BRI

In ancient time, cities played an integral part as the connective tissue of the Silk Road road. UNESCO launched an interesting program “Cities alongside the Silk Roads” in 2015, defining cities’ roles as being essential hubs of trade and exchange.^[2] In the promotion of modern-day silk roads, cities especially global cities are playing an indispensable role as well as benefitting from the grand initiative.

On the one hand, cities as representatives of sub-state diplomacy is reflecting more verticalization of foreign affairs in China and become frontier players in promoting BRI. I call it the “third wave” of sub-state diplomacy since Reform and Opening-up.^[3] In the Vision and Actions of BRI, some nodal cities and city clusters in China have been mentioned. It reflects a hope of promoting balanced regional development inside China through BRI, while cities with better foundation for openness act as nodes. Notable improvement of local conditions will naturally attract capital inflow.^[4]

On the other hand, BRI is endeavoring to empower cities along the trade routes with five cooperation priorities, namely policy coordination, facilities connectivity, unimpeded trade, financial integration and people-to-people bonds, which are regarded as the five pillars of BRI.^[5] The latest Annual Report of World Cities selects 351 cities in 138 countries, categorize 52 different types of node cities, including 15 major node cities, 11 minor node cities，26 general node cities and 108 potential node cities.^[6]

With the further promotion of major BRI projects and developments of regions along BRI, cities could realize rapid urbanization and industrialization, upgrading to emerging development pivot. 

 

Typical examples of port cities along BRI

On the topic of different types of nodes cities along the BRI, there are a plethora of port cities worth mentioning. One emblematic example in Europe is the Greek port of Piraeus, which is a critical pivot city along the BRI. In 2016, the state-owned shipping company COSCO acquired a majority (51%) share of the port, Since then, the amount of goods passing through the port has more than tripled, making it the fastest growing port in the world, the largest in the Mediterranean and the third largest in Europe, after displacing Hamburg. During a visit to Greece last year, China’s President Xi Jinping and Greece’s Prime Minister Kyriakos Mitsotakis announced that COSCO would be investing about 600 million euros ($660 million) to develop Piraeus further. “The objective is to transform it into the biggest transit hub between Europe and Asia and, potentially, the biggest port in Europe.”^[7] Piraeus' success gives a snapshot of the immense business potential made possible through growing trade and connectivity between China and Europe, by the BRI.

Another example witnessed in Asia is the Colombo Port City in Sri Lanka.. An agreement was signed in 2011 between the Sri Lanka Ports Authority (SLPA), Board of Investment (BoI) and Urban Development Authority (UDA) with China. The main objective of the project was to create not only a major maritime hub but also a harbour city that would attract major overseas private investors. The Chinese investment for the Colombo Port City is the biggest single FDI in Sri Lanka, standing at US$1.4 billion. The Port City is expected to be a game changer for modern service development in Sri Lanka, made up of financial, ICT and professional services along the lines of Dubai International Financial Centre and the Gujurat International Financial Tec-City. On completion in 2042, the development is expected to add 1.5 million units of A-grade office space to Colombo, tripling its current office space capacity.^[8] According to the latest assessment of PwC, assuming the Port City is 60 per cent operational, it will generate 122,000 jobs and bring in close to a half billion dollars of FDI. Even higher numbers are predicted during the construction phase of the project.^[9]

 

Post-COVID 19 Health Silk Road

The unexpected outbreak of COVID-19 pandemic in early 2020 has negatively impacted the world economy in an unprecedented way.^[10] The pandemic also affects the promotion of BRI, with delays and disruptions to China’s construction and investment plans overseas. Many projects have been affected since the virus emerged.

However, the Chinese perspective is that the impact of COVID-19 on the Belt and Road (BRI) is temporary and limited. Despite the impact, Chinese investment in Belt and Road partner countries increased by 11.7 percent in the first quarter and trade with them went up by 3.2 percent. According to data from China's General Administration of Customs, China's foreign trade with countries along the Belt and Road totaled 2.07 trillion yuan (301.1 billion U.S. dollars) in the first three months of this year. “From an overall and long-term perspective, COVID-19 will only strengthen and re-energize Belt and Road cooperation and open up new possibilities.”^[11]

Cities are on the front lines of coping with the pandemic and its lasting impacts.^[12] We will witness lasting changes from their physical form to economic and community structures. In the post pandemic world, the BRI will generate a strong impetus for cities to revitalize their economies and attract more investment. Health cooperation might be one priority for the further promotion of BRI. In 2015, China has already asserted the importance of multilateral health governance. Now, the Health Silk Road has been dusted off and relaunched. President Xi raised the notion of working with Italy to build a “Health Silk Road” when holding a phone conversation with Italian PM Giuseppe Conte on March 16, which was the first high-level reference to the term in the midst of the COVID-19 pandemic. It appears to be a rhetorical extension of the BRI into the global health sector. ^[13] Against the backdrop of a lasting pandemic, China will definitely distribute more capital to accommodate public health projects and propose fresh health initiatives in the BRI, which would produce new investment opportunities for cities in the long run. In order to rebuild their economies after the pandemic, cities along the BRI will compete with one another to attract the maximum inflow of information and finance, a smart way to scale up their healthcare sectors to obtain more investments.

 

NOTES:

[1] “China’s trade with BRI countries booms in 2019”, Xinhua, January 14, 2020.

[2] “Cities along the Silk Roads”, UNESCO

[3] Ren Yuanzhe, “Sub-State Diplomacy and Its Practice in Trans-boundary Cooperation”, International Review, No.3, 2017, pp.105-109.

[4] Liu Weidong, The Belt and Road Initiative: A Pathway Towards Inclusive Globalization, Routledge, 2019, p.139.

[5] Zou Ciyong, The Belt and Road Initiative: A Platform for Sustainable Urban and Industrial Development, in MakingIt: Industry for Development, Number 24, 2017, UNIDO, pp.24-26.

[6] Tu Qiyu ed, Annual Report on World Cities (2019), Social Sciences Academic Press, April 2019.

[7] “China bought most of Greece’s main port and now it wants to make it the biggest in Europe”, CNBC, November 15, 2019.

[8] “Chinese Investment and the BRI in Sri Lanka”, Research Paper, Chatham House, March 2020. p.10. 

[9] PwC, Economic Impact Assessment of the Port City Colombo, Feb 11, 2020.

[10] “The Global Economic Outlook During the COVID-19 Pandemic: A Changed World”, The World Bank, June 8, 2020.

[11] “Impact of COVID-19 on BRI cooperation temporary and limited: Chinese FM”, People’s Daily Online, May 24, 2020.

[12] Urban and Disaster Risk Management Response to COVID-19, World Bank Group, April 3, 2020.

[13] Kirk Lancaster, Michael Rubin and Mira Rapp-Hooper, “Mapping China’s Health Silk Road”, Asia Unbound, CSIS, April 10, 2020.

 

The opinions expressed are those of the authors. They do not reflect the opinions or views of ISPI