24 March 2019
China Development Forum
Belt and Road Initiative
**Check against delivery**
Good morning and thank you Madam Xu, for that kind introduction.
It's always a pleasure to be back in Beijing, and I'm honoured as part of this esteemed panel to have the opportunity to explore with you the next possibilities that I see and we all see, for the world's largest investment and infrastructure project. And what I'd like to do is to down play some of the geopolitical issues that get associated with this initiative, and raise up the economic importance of this agenda, very much in the context of the title of this session inclusive and win-win.
In global terms, it is enormous and the contribution it can make to development, to trade, to employment and to poverty alleviation is quite immense. And also I think we should remind ourselves of some of the genesis of this initiative. It is clearly global in scope. But it's also related to something that's a huge concern, I know within China, about the regional development within China and how we can push some of the economic fortune that has stayed too close to the east farther west, and of course even further along the Belt and Road. Clearly, it's geared to upgrading and spreading higher standards within China and in Chinese industry, but also helping to do so with many other countries in cooperation with the aims I've just described, in the interests of many aims, not least things of the environment.
And of course it's looking to a future where some of the excess capacity that China is now growing will have to be taken up elsewhere. And I don't mean just by that, more exports, I mean in the case of something like BHP, a recognition that more and more steel will be made along the Belt and Road using, one hopes, some small amounts of BHP products, like iron ore and metallurgical coal and copper for example.
It is important to continue to reflect, as we all do at events like this of the economic transformation within China over the last four decades. It is a tremendous testament to this country's leaders, who clearly understood from the get go, the importance that a connected and modern infrastructure, a network that includes roads and rails and ports as well as telecommunications and electricity was to be pre invested in order to forge the path that we've now seen towards economic prosperity.
And while China's growth is now moderating as it enters a new phase, it will remain a huge and increasing contributor to lifting the global economy. But China alone is not going to be enough. It is going to have to be spread increasingly across Asia, across Eurasia in line with the aims of the Belt and Road initiative, as we all work together in a spirit of cooperation. Of course, there is competition within it, to power new growth, to eradicate poverty and inequality, and push this up, the upgraded infrastructure westwards on the basis of greater economic cooperation and stability, right across Eurasia.
To put some numbers on this. The Asian Development Bank estimates a gap of US$459 billion per year in Asian infrastructure investment, or about 2.4 per cent of developing Asia’s GDP. And when social funding such as health and education are included, and I know they are often included in some of the Belt and Road initiatives and some of the work of the AIIB, then this almost doubles, to US$907 billion.
This gap exists because Asia’s developing countries spend about US$881 billion a year on infrastructure investment. Well below the estimated US$1.34 trillion needed from 2016 to 2030. Given the massive funding deficit, BRI provides a way to fill this gap.
The original Silk Road was very much a prototype for globalisation. It created a network of commerce and cultural exchange between east and west. And it created a spirit of cooperation, as well as competition. It was aimed, as I think Belt and Road is also about, to create a blend of best of what is west and best of what is east.
I strongly believe that the Belt and Road can revitalise this ancient trade corridor. It can achieve greater cross-border cooperation, and I think, obviate some of the protectionist forces that now threaten free flow of trade and investment, as well as promoting the associated cultural exchange and harmonisation that comes with this.
Our analysis at BHP shows that Belt and Road initiative projects can generate up to 150 million tonnes of incremental growth in steel demand. And not all of this is going to happen in China, it's going to happen along the Belt and Road, that's equivalent to a 9% increase in the annual demand for steel, spread over a 10-year period.
This is considerable. It will double the rate of local steel demand along the Belt and Road that have been observed since 2011, and it will also add considerably to the demand for one of our other products, copper, where we expect demand of an additional 1.6 million tonnes. That's also equivalent to 7% of annual demand in 2017.
But the spillover benefits of this of course are expected to provide a much wider field of economic opportunity. Our research indicates that about 30% of the Belt and Road related investment will flow into new economic zones, industrial parks, manufacturing facilities and public buildings, all across economies that are emerging, in the wake, of China’s rise, and will provide a very important ladder of economic development to those economies.
The Belt and Road initiative has gathered pace since it was first conceived six years ago. It's now very much shifted from a concept to implementation. Inevitably a project of this scale, its complexity, its risk, is going to suffer the odd setback and criticism, but I have a sense that China, as the main architect of the Belt and Road along with many of the other participants are learning from this, as they translate it into reality.
And as a result, I think there's a number of factors that now have become and will remain important. Host countries are going to have to have their opportunities, their right to evaluate the risks and the benefits of participation. They're going to have to have a say in projects and to ensure that they will meet the immediate and long-term needs of its people. They're going to require a long-term sustainable form of project financing. They'll be required to be able to offset some of the risks of debt traps that have, I think, been talked about in some of other contexts.
The development is going to have to be inclusive of local economies, and it has to be very supportive of imperatives like employment and improving livelihood and environmental performance.
As I read it, China now believes that the Belt and Road initiative to succeed, must embrace three core principles; consultation, contribution and shared benefits. China has shown a willingness to listen, to adapt, and partner with many of the multilateral institutions, including the financing companies in order to help the large-scale projects, which are now emerging and underway to succeed.
I think the Belt and Road initiatives will absolutely hinge on that same spirit of cooperation with the international community. And in doing so, it will have the potential to make a direct and indirect contribution of huge economic significance and a prosperous legacy for many decades to come. So, in closing if I may, use the words of a Chinese proverb, when we all chip in and add wood to the bonfire, the flames will grow much higher.