3 FALL 2022 NO.68 / THOUGHT LEADERSHIP BRIEF Figure 2. A Kaleidoscopic Perspective of the Perceived Benefits from the Belt and Road Initiative (BRI) and Build Back Better World (B3W) Projects. In their commentaries, Lin (2022) and Lewin and Witt (2022) emphasise the importance of China’s geopolitical objectives related to the BRI. Lin argues that a key role for public policy is to help countries overcome the bottlenecks in hard and soft infrastructure so as to reduce the transaction costs in their businesses and allow for specialization in sectors with latent comparative advantages. The BRI can thus assist BRI host countries in structurally transforming their economies by providing them with access to infrastructure investment. Lewin and Witt (2022) take a more cautious view. They see the BRI as part of a larger effort by China to develop an alternative world economic order. The authors conclude by saying ‘‘[i]t seems to us that a stronger recognition of the political foundations of the BRI would open up a vast and likely highly rewarding range of research opportunities. It is our hope that IB scholars will capture them.’’We wholeheartedly agree with this statement. BRI Host Country Perspective Many BRI countries face substantial infrastructural deficits that leave them poorly integrated in regional and world markets (Ruta et al., 2019). Direct investment from China may help generate economic development in these countries. At the same time, China’s state capitalism, its growing clout in the global economy, its increasingly proactive geopolitical stance, and rising tensions between China and the US all require host countries to consider China’s non-economic motives of BRI investments and the geopolitical ramifications of participating in a BRI project (Li et al., 2022). For countries that are geopolitically aligned with China, China’s call for developing a‘‘community of shared destiny’’through the BRI may have a special resonance that increases their willingness to participate in BRI projects (Li et al., 2022; Maçães, 2019). Other countries – especially those more closely aligned to the US and India – may be more reticent. The geopolitical context also varies over time. Several BRI projects have led to debt distress, asset seizures and outpourings of negative public sentiment (Buckley, 2020). De Beule and Zhang (2022) use fDi Markets data from 2003 to 2019, and find that both a higher host country BRI sentiment and a host country policy agreement stimulate Chinese greenfield investment. These effects are especially pronounced for Chinese SOEs compared to private firms, which provide credence to Li et al.’s (2022) proposition that Chinese SOEs face a disproportionately high legitimacy gap in countries that are geopolitically less aligned with China. Third-Country Perspective The sheer size and scope of the BRI imply that the initiative influences the political context far beyond China and BRI host countries. Third countries, such as the US, Japan, and India, have been paying careful attention to the economic and geopolitical effects of the initiative and have developed their own IB policies in response. The initiative promises to reduce trade costs for BRI economies by 2.8% on average with the rest of the world, and by 3.5% with other BRI economies, stimulating economic development (De Soyres et al., 2019). The growth in global GDP that these trade cost reductions generate can benefit third countries by creating more demand for their products and by generating greater macroeconomic stability in the BRI region (Hillman, Sacks, Lew, & Roughhead, 2021). It also helps address several Sustainable Development Goals (SDG) related to infrastructure, poverty and inequality, thus serving as a vehicle for the attainment of the SDGs across critical regions of Asia and Africa by 2030 (Lewis et al., 2021). While we have shown that BRI projects are dominated by Chinese SOEs, the Chinese government’s introduction of ‘‘Third-Party Market Cooperation’’ between Chinese firms and MNEs may provide an opening (Zhang, 2019). However, there is concern that China has purposefully structured the BRI in a way that provides an asymmetric competitive advantage for its own SOEs in BRI countries (Teece, 2020). Li et al. (2022) show that close collaboration between the Chinese state and its SOEs gives SOEs a leg up in BRI projects. Ghossein et al. (2021) argue that the lack of transparency in BRI public procurement helps sustain this asymmetric competitive advantage of Chinese SOEs. Petricevic and Teece (2019) raise the alarm bell that this systemic competition can lead to a bifurcated world order between rule-of-law countries that have a default predisposition towards transparent relations between the firm and home-country governments, and rule-of-rulers countries that systematically favor domestic incumbents. Third countries share the concern that the BRI strengthens China’s political leverage over BRI host countries, moving these countries away from their own sphere of influence (Hillman et al. 2021). It is for this reason that geopolitical rivals of China have started countering the BRI by proposing alternative sources of funding for infrastructure projects. In June 2021, the Group of Seven richest democracies (G7) introduced the Build Back Better World (B3W) initiative that would offer developing nations an infrastructure plan that rivals China’s BRI. We can integrate insights from the three perspectives to develop a more coherent and nuanced understanding of the conditions under which BRI projects emerge, how they change over time, when third countries will initiate countering ventures such as B3W, and under what circumstances BRI (and B3W) projects can become win– win situations for all sides (Figure 2). Home-country improving BRI projects Host-country improving BRI and B3W projects Home-country improving B3W projects Geopolitically neutral, sustainable BRI and B3W projects with competitive bidding Geopolitically neutral BRI and B3W projects with competitive bidding Sustainable B3W projects Sustainable BRI projects BRI HOST COUNTRY CHINA THIRD COUNTRY
RkJQdWJsaXNoZXIy NDk5Njg=