Stage 3: Implementation of OBOR – Overcoming the Limitations of the Great

The Great Western Development Strategy aimed at providing preferential policies for the western region of China such as taxation rates, land use rights, and favorable bank loans, as well as facilitating huge fiscal transfers to western China. The strategy also includes improving the transportation and other infrastructure in western region.

The major goals for the plan set by the central government are to increase economic growth, expand infrastructure construction, improve the ecological environment, provide better public services, develop and strengthen local industries, raise people’s living standards and reform and open up the region. Although the western region has suffered, it has great potential to show economic growth as it has enormous reserves of mineral and energy resources with plenty of sunlight throughout the year.

With the Chengdu-Chongqing Economic Zone as a start, this “Go West” project is expected to show prominent results, boosting China’s economic growth and becoming a key economic center of western China.

2.3 Stage 3: Implementation of OBOR – Overcoming the Limitations of the Great

with the OBOR initiative, it is astonishing to find overlapping components. China is aware that infrastructure development is the key to the success of the western region. The new Silk Road international transport corridors will lead from Asia all the way to Europe, opening the gateway to China and boosting the economic growth of the western inland region.

There is much evidence of domestic policies being directly related to improving the western region, which is in the area of the new Silk Road. Such evidence shows that China’s OBOR and its efforts to resolve its internal issues are closely intertwined and related. In the following, I aim to examine this evidence with regard to China’s Western Region Development strategy and find its connection to the implementation of OBOR.

As a first example, ethnic unrest in Xinjian is connected to the divide of this area between the north, where state farms, most of the Han population, and almost all the industrial capacity are located; and the south, which remains overwhelmingly rural and settled by ethnic minorities. There are certainly existing concerns with regard to declining state capacity, weak economic institutions, regional problems, inequality, and potential disintegration (Wei, Fang, 2006). Moreover, besides the economic setback in the region, the growing risk from terrorism and regional instability is another concern for China to overcome. However, the government argues that implementation of the OBOR initiative can help to promote international counter-terrorism cooperation, naturally affecting its western region in a positive way. It seems that China hopes to resolve the terrorism issue in its western area with the help of the OBOR initiative and its neighboring countries, arguing that they will all benefit from each other. In fact, many countries included in the Belt and Road initiative are currently undergoing social and political transitions, resulting in social instability. The government report encourages cooperation between China and member countries on appropriate counter-terrorism efforts, which can

simultaneously facilitate the implementation of the Belt and Road initiative.

Finding the connection between FYP and OBOR

The 12^th FYP and the visions and actions of Belt and Road, both announced by the central

government of China, have overlapping components. For instance, the Vision and Action Plan of the Belt and Road specifically states that the initiative will fully leverage the comparative advantage of its various regions, adopt a proactive strategy of further opening-up, and comprehensively improve the

openness of the Chinese economy. As for the northwestern and northeastern regions, this plan states that they plan to utilize Xinjiang’s geographic advantage and its role as a window of westward opening-up, and make it a key transportation, trade, and logistics center, and a core area on the Silk Road Economic Belt. Moreover, the document also mentions other areas, such as Shaanxi and Gansu provinces, to provide full support to the economic strengths; to build Xi’an into a new focus of reform and opening-up in China’s interior; and to accelerate the development and opening-up of cities such as Lanzhou and Xining. The plan also proposes to advance the building of the Ningxia Inland Opening- up Pilot Economic Zone to create a strategic channel as a key basis for industrial and cultural exchanges with Asian countries.³³ Furthermore, it proposes to provide full advantages to Inner Mongolia, hoping to improve the railway links there. Mongolia, Nigxia, Xinning, Lanzhou, Shaanxi, Gansu, and Xinjiang are all part of the targeted 12 provinces, or the 12 featured economic zones, from China’s 12^th FYP. For example, the 12^th FYP and OBOR both make statements committing to

deepening the economic cooperation between Hong Kong and Macau, and the implementation of cooperation framework agreements between Guangdong and Hong Kong, Macau area. Such connection shows how China is trying to align its domestic development strategy with enforceable international policy.

Geopolitical Dimension of OBOR

The geopolitical dimension of OBOR, with China in the economic-political orbit of many Asian and European powers, gives China political prerogative over the rest of the world. China’s regional characteristic is close to Central Asia, the starting point leading to Europe, thereby facilitating development. OBOR helps to develop China’s western cities, but also serves to enhance its external network. Geography has an immediate effect on the OBOR initiative: the western region development and opening-up of the region are necessary to reduce the regional disparity, and to expand the

country’s external network. As part of the OBOR project, China has been aggressively investing in infrastructure in the six economic corridors in the Belt and Road. The new Silk Road spans countries in Central Asia, Europe, and all the way to Africa, and its impact on the various economies is

promising. Even with modern technology reducing the impact of spatial transaction costs, it remains a significant role in the real economy, and the fact that OBOR focuses on infrastructure developments proves its motives.

33 Embassy of The People’s Republic of China in the Republic of Mauritius, http://www.ambchine.mu/eng/zgxw/

Stages of China’s Internationalization

A systemic view of China’s internationalization process indicates that as it has developed new economic strategies for the next stage, short-, medium-, and long-term consequences follows. China took a gradual approach to internationalization and, step by step, extended its leverage by creating new economic zones and bilateral/multilateral relationships with countries around the world. In the

following, I propose three stages that reflect economic policy changes in China in terms of internationalization.

Stage 1 began with the 1978 reform, which started to reduce the barriers between Chinese cities and the global economy. Starting with the creation of SEZs authorized by the CCP for two coastal

provinces, Guangdong and Fujian, allowed the country to create special zones to attract foreign investors and offer concessionary tax and rents to them. Four SEZs were established, three in

Guangdong (Shenzhen, Zhuhai, and Shantou) and one in Fujian (Xiamen). I would categorize stage 1 as a short-term strategy for China compare to the later ones, as the main goal of opening up economic policy in this stage was trade liberalization. Later, Deng Xiaoping extended the aforementioned special privileges to other provinces, which gave Deng and other communist leaders a chance to exploit the political advantages of particularism. As the internationalization progressed, the level of deregulation and decentralization deepened, and by 1994, 311 cities and counties along with 114 zones had been opened to foreign investment, trade, and technology. In contrast to the tremendous economic growth on a national level, however, China had to face the consequence of such

particularism, which was spatial inequality. To reduce this inequality, China’s reform leaders decided to internationalize the country’s rural areas, and soon the Western Development strategy, stage 2, tried to extend the subjected region to the countryside pushing for export-led growth in rural China, and trying to resolve the vast inequalities created by decades of tilted development.

This started with township and village enterprises (TVEs) and state-owned enterprises (SOEs) penetrating global markets, leading the Great Western Development strategy to broaden the subjected countries to increase the benefits of export-led growth and lessen the regional economic gap. Then, in stage 3, the OBOR strategy also included the western and interior regions to enhance the quality of infrastructure; however, this occurred on a larger scale, with the association with countries around the world. Apart from this change in scale, the most important transition was that the characteristics of projects from each stage changed from mere trade and infrastructure extensions towards sustainable growth. The implementation of the OBOR initiative covers Eurasia, targeting countries along the Belt and Road. Internationality, peace, development, and cooperation are the key themes, and the structure of global economic change has accelerated. Hence, China understands that it needs deeper integration