23 October 2016
The exhibition center of the annual China-ASEAN Expo has become a landmark in Nanning as the city plays a key role in cross-border trade promotion. Photo:
The exhibition center of the annual China-ASEAN Expo has become a landmark in Nanning as the city plays a key role in cross-border trade promotion. Photo:

How Nanning has become a hub for ‘One Belt, One Road’

I’ve travelled to Nanning in Guangxi and the border area between China and Vietnam last week. Let me share with you some of my observations.

Currently, China and Vietnam are yet to build close political ties, and free-trade between two markets is still out of reach. The most feasible approach might be focusing on religion and tourism to kick off the cooperation.

Nanning has a geographical advantage as there is no other major city of such size near the border area. Beijing is definitely aware of this, going by the decision to have Nanjing host the annual China-ASEAN Expo.

The central government has tried to expand Nanning’s scope of jurisdiction, in a bid to build the city as another hub apart from Kunming for trading with ASEAN nations.

Beijing has already drafted a big picture to tap into ASEAN markets from various routes. Guangxi and Yunnan are the frontline, and that could be extended to Chongqing in Sichuan, then down further to Guangdong. The market potential for trading and financing services looks quite attractive.

The Beijing-led Asian Infrastructure Investment Bank has a significant strategic value as it will set up a new platform to invite multilateral investment for a number of overseas projects.

In the past, China’s approach usually worked this way: high-level officials will set the big direction through bilateral meetings, and individual state-owned enterprises will then discuss with local governments, organizations or companies on certain specific projects.

The approach has reduced some unnecessary negotiations and offered more flexibility and confidentiality. It works quite well for those who have limited experience in overseas investment.

However, this case-by-case approach has failed to bolster the economy, given the nation’s massive size. And it’s also becoming more difficult to boost related infrastructure, products and services and, in turn, bring in more capital.

In addition, many of these Asian nations have once been colonies of Western powers. Therefore, many US and European companies, as well as non-profit organizations from those nations, have very deep connections in the regions.

However, China has usually excluded these “intermediaries” in the bilateral negations. That’s part of the reason why some projects have gone nowhere in the end, just like the high-speed railway project in Mexico.

The opaque system has nothing to do with technology or business, but more to do with the way of distributing profits.

The new approach has adopted a multilateral framework, under which Beijing will take the lead while all parties will enjoy the benefits. It’s quite feasible for China’s ambitious plan to rejuvenate the Silk Road and build up railways, ports, power plants and roads in countries along the routes.

The move looks set to benefit relevant infrastructure companies and boost demand for the renminbi as well.

More importantly, the new approach will reduce resistance and opposition from different stakeholders, who can also benefit from these projects.

And the strategy will also help China’s efforts to internationalize its currency.

This article appeared in the Hong Kong Economic Journal on April 1.

Translation by Julie Zhu

[Chinese version 中文版]

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