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B&R initiative could boost US manufacturing
B&R initiative could boost US manufacturing
By Liang Haiming Source:Global Times Published: 2017/3/22 0:08:39
More than 20 world leaders, including Russian President Vladimir Putin, have confirmed their attendance at the upcoming Belt and Road Forum for International Cooperation in May in Beijing, according to media reports. However, it is uncertain whether US President Donald Trump, whose attitude toward the One Belt and One Road (B&R) initiative has always been vague, will attend.
Trump should give serious consideration to joining the B&R initiative, which could not only help promote the revitalization of the US manufacturing industry, increase jobs and push forward his large-scale infrastructure plan, but could also counter constraints brought by Japan's massive investment plan in the US.
Vowing to revitalize manufacturing to create jobs, Trump faces challenges and obstacles in achieving that goal, such as preventing US companies from moving production overseas. If Trump doesn't want manufacturing revitalization to end up as just a campaign promise, he should consider seeking cooperation with China on the B&R initiative.
A friendly approach to the B&R could attract funds from China, and Chinese investors may increase investment in the US or open local factories to help revitalize manufacturing and create jobs. On the other hand, as the Chinese economy, after years of rapid development, focuses on consumption and services and becomes the world's largest source of procurement, cooperation between the Trump administration and China on the B&R initiative would strengthen connectivity in terms of policy, trade and capital, which would be favorable for the US to increase manufacturing exports to China.
Moreover, the US manufacturing sector lacks a complete upstream and downstream industry chain. As most parts need to be imported from abroad and there is a relatively high production cost, goods made in the US have little price competitiveness. As such, there are certain complementarities between the US and China, as the latter has a complete industry chain and relatively low production costs. Cooperation under the B&R initiative would not damage US development, but would be conducive to US manufacturing and the economy.
In regards to Trump's $1 trillion infrastructure plan, questions like how to implement the plan and where to get funding are already huge obstacles.
It would be hard for the US to support such a grand infrastructure plan, but what the US needs, China can offer. China's cooperation with countries along the Belt and Road route usually starts with infrastructure construction. With China's rich experience in overseas infrastructure projects, cooperation in this field would be a win-win for the two countries.
And where will the $1 trillion come from? If Trump hopes to solve the financing problem by issuing debt, China, the second-largest holder of US treasury bond, will be crucial. If China doesn't want to increase its holding or even starts to sell US bonds, refinancing pressure will rise for the Trump administration. However, resources from China may help solve the infrastructure-financing problem.
In the meantime, Japanese Prime Minister Shinzo Abe reportedly plans to use its public pension fund to invest in the US' infrastructure, emerging industries, artificial intelligence and cyber-security sectors. By making a grand investment plan, Japan aims to recover the glory of its manufacturing industry with the help of the US market. Yet, Japan could constrain the US by buying up its industries, and could then exert its global influence accordingly.
If the US joins the B&R initiative and is introduced to investment from China and other countries, this could diversify investment in the US and counter potential constraints if Japan makes massive investments in the country.
Finally, joining the B&R initiative and conducting cooperation in third-party markets will allow the US manufacturing sector to explore new markets and drive its economy and add new jobs. Compared with China, the US may have more investment experience in some countries, so cooperation between the two in exploring third-party markets could allow them to share the risks, reduce confrontation and cultivate new economic growth momentum. Third-party markets also need China's relatively cheap products and medium- to high-end production capability as well as the US' high-end technology to develop its own economy and achieve transformation.
The author is the chief economist of China Silk Road iValley Research Institute, a Guangzhou-based think tank.bizopinion@globaltimes.com.cn
http://www.globaltimes.cn/content/1038902.shtml
