HKUST Business School Magazine

Winning Hearts and Minds: China’s Belt and Road Initiative To drive globalization, the Belt and Road Initiative must establish a narrative that inspires stakeholders in China and beyond. Biz@HKUST Biz@HKUST 30 31 // Cover // Insight By Chair Professor Jiatao LI Lee Quo Wei Professor of Business Department of Management at HKUST Business School The world is at a crossroads. Globalization — the deepening integration of economies and markets — is facing a backlash that threatens to split the globe into competing regions. In an era of trade wars and economic uncertainty, protectionism and populism are on the rise. The COVID-19 pandemic has not only fueled nationalist sentiment but also forced governments to massively limit cross-border trade and flows of people. As countries such as the US turn away from multilateralism and societies worldwide reel from the global shock of the pandemic, China is reshaping international geopolitics in line with a unique vision of globalization. It’s Belt and Road Initiative (BRI), a network for infrastructure development and economic cooperation that spans 65 countries to date, promises to usher in a new era of international commerce, cooperation, and prosperity. Inevitably, however, this mega project will create both winners and losers. Viewed through a protectionist lens, the BRI is a way to expand China’s sphere of influence and even an aggressive attempt to subvert the global balance of power. Such fears could herald a move toward deglobalization, with nations retreating from international cooperation to thwart others’ expansion. At this critical point in history, either of these routes—deeper integration or deeper fragmentation— is possible. In the face of rising economic nationalism, can the BRI emerge as a force that helps swing the pendulum back toward global integration? To realize China’s vision of globalization, the BRI must be perceived as more than merely a strategy for infrastructure investment. It must also win the battle of narratives. The power of narratives Narratives are open-ended, continuously unfolding accounts that invite participation and action. They enshrine shared meanings and sets of values for those who live, create, and interpret them. They derive their power from their ability to engage hearts and minds and thereby affect behavior and decision making. According to narrative economists, the stories we tell ourselves about the world can even propel major economic events. Considering narratives can thus help us answer “big questions” in international business and economics, such as why some countries and firms succeed while others fail on the global stage. Such narratives do not emerge from thin air. They are carefully nurtured by firms, institutions, and governments that seek to change the course of history. Successful narratives, such as globalization, act as drivers of institutional change. At the level of nation-states, narratives are shaped by powerful internal forces (such as national security concerns) and equally powerful external drivers (such as technological development). Such narratives are far from fixed. They may respond flexibly to economic, political, and socio-cultural pressure or break under the strain. Nor are narratives always logical. The present swing toward deglobalization is counterintuitive, given its overall negative impact on welfare and economic activity. Yet the power of narratives can be intoxicating. Projects such as Brexit and Donald Trump’s introduction of a punishing 25 percent tariff on steel from overseas show how potent populist narratives can override economic interests. To compete with such narratives, the globalizing narrative of the BRI must win hearts and minds worldwide. It must be perceived to serve both Chinese and foreign interest-through free trade and shared economic benefits, for example or risk being derailed by de-globalizing efforts. In short, to use a timely metaphor, it needs to “go viral.” Going viral For a narrative to go viral, it must be perceived as a force for the common good. Viral narratives have four key characteristics. They are based on common values, they invite participation, they are open- ended, and they deliver shared prosperity. Using this framework, we can determine whether and how the narrative of the BRI can drive institutional change in favor of globalization. Values are the first condition for narrative virality. The values espoused by a narrative must be meaningful, legitimate, and substantial. Most importantly, they must be shared by all stakeholders. The BRI narrative must represent a set of consistent values that ring true to firms, governments, and citizens both in China and overseas. Unfortunately, the BRI-promoted values of “community” and “shared interests” are still perceived as hollow by many. Second, narratives that go viral are those that invite participation and offer stakeholders the opportunity to change the world. Encouragingly, China’s partners in the BRI already include national governments, international institutions, firms from the signatory countries, and, increasingly, parties from third countries, including multinational enterprises. Attracting even more partners and deepening the involvement of both Chinese and non-Chinese stakeholders will be crucial to the success of the narrative. Third, viral narratives are open-ended and influenced by their environments and participants. If the globalizing narrative of the BRI is allowed to freely evolve, it will be able to adapt flexibly to disruptions such as technological innovation and even global shocks such as the COVID-19 pandemic. Finally, if the globalizing narrative of the BRI is to go viral, it must offer clear economic benefits for all potential partner countries— not just China. This will be especially important in the wake of the COVID-19 pandemic, which has ravaged economies worldwide. So far, however, only about 11 percent of China’s funding for transportation projects has been won by non- Chinese companies. This may not be enough to encourage overseas firms to buy in to the BRI narrative. This mega project [China’s Belt and Road initiative] will create both winners and losers