Hard and soft connections

China should continue to develop cross-border economic corridors, advance the institutional development of the BRI and improve the all-around support systems

Over the past decade, China's economic growth pattern has changed profoundly, from pursuing sheer quantity to balancing quantity and quality. From 2012 to 2023, its GDP more than doubled with an average annual growth of over 6 percent. Despite the complexity and volatility in the global economic environment, China's economy has been growing steadily and has become one of the main drivers of global growth.

As China seeks steady and progressive growth, it is important to understand that a series of challenges may surface due to changes in the domestic and international environment, prominent contradictions in the economic structure and the specific requirements at a new development stage.

The 2023 Central Economic Work Conference proposed to expand high-level opening-up and consolidate foreign trade and investment. To deliver on this goal, building cross-border economic corridors and the Belt and Road Initiative cooperation mechanism can provide new momentum, with the new development pattern serving as the guiding framework and all-around support system to ensure high-quality development of opening-up.

First, continue to develop cross-border economic corridors to build new value chains and supply chains.

Escalating competition between China and the United States has led to increase in trade protectionism and separatism. Against this backdrop, cross-border economic corridors should contribute to the new development pattern of dual circulation, which emphasizes on synergy between domestic and overseas markets.

These corridors are, first and foremost, the key links to promote the integration of domestic and global value chains and extend the regional value chains along the way. This will facilitate China's foreign investment attraction as well as Chinese enterprises' overseas development.

Building and improving regional value chains parallel to the global value chain is also important. As the global value chain reshuffles, the dual circulation model with China as the hub will help leverage the strengths of China and partner countries along the corridors, broaden and deepen production capacity cooperation, and strengthen the integration of value chains and supply chains.

Establishing a regional collaborative innovation community to promote the two-way integration of the innovation ecosystems in China and partner countries is also advised. This will not only enhance the resilience of China's economic circulation and high-level opening-up, but also lay the foundation for new technology progress to drive the value chains and supply chains along the corridors.

Developing cross-border economic corridors should be guided by the concept of a "community with a shared future" and supported by high-standard market systems. The key focus is to improve industry coordination and layout along cross-border transportation channels. By introducing rules and systems to facilitate trade and investment and free trade zone agreements, trade rules can be integrated, policies of countries along the corridors coordinated, and market and resource reallocation promoted, so as to drive the integration and innovation of regional value chains, which is crucial for promoting the virtuous cycle for an open economy.

Second, advance the institutional development of the BRI and promote the "soft connectivity" of rules and standards.

On the one hand, the Belt and Road Forum for International Cooperation should be a key platform to develop national institutions that will guide high-level opening-up. This should include an optimized pattern of jointly building the Belt and Road, which will promote institutionalized cooperation and provide more growth impetus for partner countries.

Top-level management institutions should also be optimized to clarify the positioning and goals of the BRF, determine the priorities of capacity cooperation based on the convergence of interests of all parties, and guide the geographical layout of Belt and Road projects.

On the other hand, high-quality cooperation mechanisms for jointly building the Belt and Road should be promoted based on the network of free trade. Free trade agreements reflect the willingness of countries to promote free trade cooperation. It is highly feasible to promote the initiative through bilateral or multilateral institutional agreements.

Agreements such as the Lancang-Mekong cooperation and the Indochina Peninsula Economic Corridor, along with related projects, can be incorporated into the cooperation framework of the China-ASEAN Free Trade Area Agreement, to facilitate regional trade.

Third, improve the all-around support systems to ensure the sustainable development of high-level opening-up.

For China's domestic support systems, it is necessary to further improve the regional and country-specific risk assessment, investment and financing systems and debt sustainability guarantee.

This includes a series of tasks. First, a cross-sector risk assessment system should be established to enable an alert mechanism for investment security and regular release of important information for specific regions and countries, so as to help enterprises enhance their risk awareness and capabilities.

Second, more direct financing approaches should be explored, including establishing and improving a diversified, sustainable, and inclusive "going global "investment and financing system, building a cross-border financial service network, to facilitate multi-channel financing.

Third, the debt sustainability guarantee mechanism should be improved. Based on the World Bank's debt sustainability analysis framework, third-party financial institutions and international organizations can be invited to conduct debt sustainability assessments on relevant projects, which can be managed according to their debt risk ratings.

In terms of the intergovernmental cooperation support mechanisms, dispute resolution systems are essential for Chinese enterprises to "go global". Therefore, a sound consultation and communication mechanism should be established to improve bilateral and multilateral responses, explore targeted dispute settlement mechanisms, and improve efficiency.

International dispute settlement mechanisms offer good examples. Multilateral organizations can be introduced to establish a dispute coordination department, which will resolve commercial disputes based on the principles of fairness and justice, and equally protect the rights and interests of all parties.

Finally, enhance the capabilities for systemic risk prevention and control. China and host countries should strengthen communication and coordination, enhance the awareness of a security community, improve security measures and strengthen the security of trade and investment projects and personnel.

In addition, enterprises need to be guided to fulfill their responsibilities toward risk prevention and control, including enhancing risk awareness and capabilities, regulating overseas business operations, establishing risk prevention and control measures, so as to ensure early detection, early warning and early prevention.

The author is a professor and associate dean of Department of Economics at Peking University. The author contributed this article to China Watch, a think tank powered by China Daily.

The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.