HKUST Business School Magazine

Biz@HKUST Biz@HKUST 28 29 // Cover // Insight media attention and severely damage the reputation of Chinese firms. Opposition politicians may mobilize support by criticizing China or the close relationship between government leaders and China. China has drawn criticism from climate activists for being the only international donor that continues to finance coal energy projects. In many instances, China has funded projects requested by government leaders without doing sufficient due diligence to assess environmental and social impacts or to reach out to local communities. Some Chinese companies are gradually learning from their mistakes, by funding more renewable energy projects and focusing more on corporate social responsibility. A main conclusion from these findings is that if the BRI is to realize its lofty objectives, China would be well-advised to put greater priority on ensuring that Belt and Road projects meet high standards with respect to both economic viability and environmental and social impacts. The record of Western foreign aid programs to the developing world shows convincingly that money does not buy development. A commitment to finish How has deglobalization due to the US-China trade war and the pandemic affected the implementation of the BRI? A bilateral trade war naturally diverts economic activity to third party countries which actually could increase investment incentives in BRI countries. For example, Chinese companies and multinationals who manufacture goods in China and export them to the US have an incentive to relocate production from China to other countries to avoid punitive tariffs and diversify risk exposure. Producers in BRI countries may have greater opportunities to export to both China and the US. At the same time, if the trade conflict slows growth in the world’s two largest economies or spreads protectionism to other countries, this could have a chilling effect on foreign investment and trade globally. In this light, the recent signing of the world’s largest trade pact, the Regional Comprehensive Economic Partnership (RCEP) signed by all ASEAN countries, China, Japan, South Korea, Australia, and New Zealand, demonstrates that countries in East Asia are committed to expanding rather reducing economic integration efforts. The agreement is complementary to the Belt and Road Initiative in that it facilitates globalization of supply chains and increases the benefits of trade and foreign investment. Similarly, the leaders of most BRI countries have reaffirmed their commitment to completing major Belt and Road projects even if they are delayed due to the pandemic. Most infrastructure and investment projects were delayed by at least three to six months due to disruption caused by lockdowns, travel bans, and the preoccupation of government leaders and firm managers with responding to the crisis. The pandemic was a major economic shock to nearly all countries, even those that did a good job controlling the outbreak. This led many governments to re- prioritise spending commitments, which led to the cancellation of some BRI projects. On the other hand, some governments with sufficient resources, such as the Philippines, decided to increase infrastructure spending as a way to stimulate their economies. Many economies, Reference HKUST Institute for Emerging Market Studies and United Overseas Bank (2020). The Belt and Road Initiative in ASEAN. Authored by Albert Park, Dini Sejko, and Angela Tritto. Diao, Wentian, and Albert Park (2021). Which Countries Have Benefited Most from China’s Belt and Road Initiative?, HKUST IEMS Working Paper No. 2021-79. Lomas, Guenther, Albert Park, and Han Zhang, The Impact of the Belt and Road Initiative on China’s Soft Power, work in progress. Bian, Ce, Jiaming He, Yao Amber Li, Weili Liu, Shiying Ou (2021). Does Belt-and-Road Initiative Promote Trade Flows? An Empirical Investigation, working paper. Media Sentiment Towards China in Belt and Road Countries Receiving the Most Chinese Foreign Direct Investment (FDI), 2013-2019 The record of Western foreign aid programs to the developing world shows convincingly that money does not buy development including the US and China, are bouncing back strongly in 2021. To sum up, China’s ambitious effort to promote greater connectivity with other countries through the BRI has created new infrastructure, increased investment, and expanded trade in BRI countries, but also has encountered criticisms that have undermined the Initiative’s ability to win hearts and minds in BRI countries. Nonetheless, the BRI is not going away any time soon. The recent turn towards deglobalization and growing anti-China sentiment create a challenging environment for the Initiative, but leaders in China and in most BRI countries remain committed to pursuing greater economic integration even as they adjust to a more confrontational and competitive relationship between the world two largest economies.