Chinese President Xi Opens Globalization Forum With $78 Billion Pledge

(Bloomberg) -- President Xi Jinping laid the framework for Chinese-style globalization and his ambition to lead it during a speech inaugurating his cornerstone diplomatic trade initiative for a new Silk Road.

Grounding the plan in China’s history, Xi described the Belt and Road Initiative as a "project of the century" that had its inspiration in the ancient trade routes linking the country with the world. He pledged an additional 100 billion yuan ($14.5 billion) for China’s Silk Road Fund, 380 billion yuan in new lending for participating nations, and 60 billion yuan in coming years to developing countries and international organizations that join the program.

Xi repeated his call for multilateral trade, describing his initiative as a force for peace in "a world fraught with challenges." He told the almost two dozen world leaders gathered at the forum that countries should "uphold and grow an open world economy."

The speech built on an image of Xi as a champion of global free trade that he’s sought to hone since President Donald Trump’s election, most notably in a January speech in Davos. It set the tone for a major two-day forum starting Sunday to discuss the Belt and Road plan, which aims to connect China with Europe, Asia and Africa through infrastructure and investment.

Read More: Chinese Largesse Lures Countries to Its Belt and Road Initiative

"They see an opportunity to fill the vacuum and take advantage of perceptions globally," said Andrew Gilholm, director of analysis for North Asia at Control Risks Group, referring to changing perceptions of U.S. leadership in the Trump era. The presence of major leaders in Beijing to hear China’s plans "fits with the kind of image China has been trying to project."

Assembled delegates included representatives from more than 100 countries and heads of state including Russian President Vladimir Putin, Turkish President Recep Tayyip Erdogan and Pakistani Prime Minister Nawaz Sharif. Representation from India, however, was conspicuously absent as were all Group of Seven heads of state except Italy’s.

During the opening ceremony, the first speakers to follow Xi were Putin and Erdogan, who pledged support for China’s initiative while showcasing their own regional projects. Putin called the initiative "timely and promising" while highlighting the Russia-led Eurasian Economic Union. Erdogan told delegates that the world’s economic center of gravity was shifting to the East and said he would like Turkey’s planned infrastructure expansion to be linked with the Belt and Road.

Other world leaders lined up to praise the project. U.K. finance minister Philip Hammond called the initiative "truly groundbreaking," stressing the country’s desire for new global trade ties as it prepares to leave the European Union. Pakistan’s Sharif called the forum a "historic event" that would "tear down barriers to trade and commerce."

Addressing concerns that the initiative will become a bonanza for Chinese companies or a strategic play for regional domination, Xi declared that the plan would be open to all countries and would complement each nation’s development goals.

‘Fair Process’

Other leaders hinted at potential problems in their remarks. Matt Pottinger, senior director for East Asia on the National Security Council and special assistant to Trump who is representing the U.S. at the forum, urged transparency and "fair process" in his comments. International Monetary Fund Managing Director Christine Lagarde called for high-quality infrastructure that respects the environment while also welcoming the Chinese initiative.

Xi’s speech also drew implicit contrast between Chinese-style development objectives and those of the West, saying the initiative won’t resort to "outdated geopolitical maneuvering." He stressed that China doesn’t seek to export its development model to other nations while also calling for mutual respect of one another’s sovereignty, territory and "core interests."

Eighteen countries including the U.K. agreed Sunday on the guiding principles for financing development of the initiative. The Asian Development Bank, Asian Infrastructure Investment Bank, European Investment Bank, New Development Bank, World Bank, and China’s Finance Ministry signed an agreement on promoting Belt and Road, Finance Vice Minister Shi Yaobin said.

China will also encourage financial institutions to conduct an estimated 300 billion yuan ($43 billion) in overseas business using yuan, the official Xinhua News Agency said.

Xi proposed the initiative, then known as the Silk Road, in 2013. China’s investment in Belt and Road countries has surpassed $50 billion, according to Xinhua. Credit Suisse Group AG estimates the plan could funnel investments worth as much as $502 billion into 62 countries over five years.

The speech set the ambitious plan against the sweep of Chinese history. The first nine minutes of Xi’s remarks traced the Silk Road’s genesis 2,000 years ago with ancestors trekking across Eurasian steppes to the opening of the $100-billion AIIB in Beijing last year. He evoked treasure-laden ships, the ancient cultures of the Nile and Ganges, and Buddhism’s spread from India to China and beyond.

Missile Launch

But present-day concerns also intruded on the event. Hours before Xi spoke, North Korea fired a ballistic missile, its seventh such test this year, just days after South Korea elected a president who vowed to engage with Kim Jong Un’s regime. The launch defies United Nations sanctions and Trump’s warnings that military action is an option to prevent Kim’s regime from developing an ICBM with the capacity to carry a nuclear warhead to North America.

While Xi didn’t address China’s irksome ally, his remarks referred to geopolitical difficulties along the Belt and Road route. "The ancient silk routes thrived in times of peace, but lost vigor in times of war," he said. "The pursuit of the Belt and Road Initiative requires a peaceful and stable environment."

China’s foreign ministry later issued a statement opposing missile launches by North Korea that violate United Nations resolutions. China urged restraint from all parties on the currently “complex and sensitive” situation on the Korean peninsula, the statement said.

The real challenge, though, for the initiative will be implementation. “To get a procession of leaders coming and saying nice things in Beijing, to have the vassal states gathering in the ancient center of the world is very nice," said Gilholm, "but to actually implement a gigantically expensive and ambitious project and vision to remake how a large part of the globe interacts is a lot more difficult.”

With assistance from Peter Martin

Bloomberg