The Belt and Road Strategy in International Business and Administration

The Belt and Road
Strategy in International
Business and
Administration
Wei Liu
University of Sydney, Australia
Zhe Zhang
Jin-Xiong Chen
Wuyi University, China
Sang-Bing Tsai
University of Electronic Science and Technology of China
Zhongshan Institute, China & Capital University of Economics
and Business, China & Wuyi University, China
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Names: Liu, Wei, 1993- editor.

Title: The Belt and Road strategy in international business and
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Description: Hershey, PA : Business Science Reference, [2020]
Identifiers: LCCN 2018054603| ISBN 9781522584407 (hardcover) | ISBN
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Table of Contents
Preface.................................................................................................................. xv
Acknowledgment..............................................................................................xviii
Section 1
International Business Studies Under the Belt and Road Strategy
Chapter 1
The China Model in the Global Economy..............................................................1
Bahar Baysal Kar, Kırklareli University, Turkey
Taha Eğri, Kırklareli Unıversıty, Turkey
Chapter 2
The Belt and Road Strategy in International Business and Administration:
Corporate Social Responsibility...........................................................................28
Jianyu Chen, Dong-A University, South Korea
Wei Liu, University of Sydney, Australia
Chapter 3
The “Outgoing Strategy” of Chinese Companies.................................................52
Ping Zhou, City University of Macau, China
Tim Wong, City University of Macau, China
Chapter 4
The Study of Intellectual Property Protection System: Under the Context of
“One Belt One Road”............................................................................................58
Dongjuan Lv, City University of Macau, China
Ying Chen, University of Malaya, Malaysia

Chapter 5
Research on Protection and Development of Intellectual Property in China
From the Perspective of “The Belt and Road”......................................................67
Fuda Li, City University of Macau, China
Linling Zhong, University of Nottingham Ningbo China, China
Chapter 6
Intellectual Property Protection Strategy Under the Belt and Road Initiative......82
Yong Zhang, University of Macau, China
Section 2
Industrial and Trade Development Studies Under the Belt and Road
Strategy
Chapter 7
An Assessment of the Belt and Road Performance: Based on the Case of
Machinery Shipment From Shanghai to Rotterdam...........................................108
Sedat Baştuğ, Iskenderun Technical University, Turkey
Turgay Battal, Iskenderun Technical University, Turkey
Chapter 8
The Analysis on Railway Transportation Competitiveness and Influencing
Factors of Typical Goods in Beijing-Tianjin-Hebei Region: A Case of Coal
Transportation.....................................................................................................128
Shiqi Li, Beijing Jiaotong University, China
Maoxiang Lang, Beijing Jiaotong University, China
Xueqiao Yu, Beijing Jiaotong University, China
Yanling Wang, Beijing City University, China
Xiao Yu, China Academy of Railway Sciences Corporation Limited,
China
Chapter 9
The Development of Electrolytic Aluminum Industry and the Belt and Road
Strategy: A Collaborative Innovation Perspective..............................................150
Gexin Han, City University of Macau, China
Xinyao Li, Northeast Electric Power University, China

Section 3
Regional Case Studies Under the Belt and Road Strategy
Chapter 10
Making Use of Geographic Advantage: Building “One Belt One Road” Vital
City......................................................................................................................164
Zhanwen Zhang, City University of Macau, China
Siwei Sun, Xi’an Jiaotong-Liverpool University, China
Chapter 11
Belt and Road Initiative: The Case of Malaysia.................................................176
Teo Poh Chuin, Tunku Abdul Rahman University College, Malaysia
Chapter 12
Opportunities of Tourism Development of Mongolia Under the Belt and
Road Initiative.....................................................................................................200
Huilian Han, Jilin University, China
Hui Li, Jilin University, China
Glossary............................................................................................................. 215
Compilation of References............................................................................... 217
Related References............................................................................................ 237
About the Contributors.................................................................................... 268
Index................................................................................................................... 272
Detailed Table of Contents
Preface.................................................................................................................. xv
Acknowledgment..............................................................................................xviii
Section 1
International Business Studies Under the Belt and Road Strategy
Chapter 1
The China Model in the Global Economy..............................................................1
Bahar Baysal Kar, Kırklareli University, Turkey
Taha Eğri, Kırklareli Unıversıty, Turkey
The purpose of this chapter is to stand against the claim that the same neo-liberal
model emerges in all countries as a result of the competitive pressures arising from
globalization. Countries can experience a globalization pattern that improves their
growth performance and living standards with different policy preferences in the
fields of finance, trade, and investment. The variety of Chinese capitalism is a case
of this situation. In the first section, this Chinese development model with its illiberal
policies first is examined. In the second section, the new development initiatives
and institutional arrangements and their potential effects are discussed. In addition,
the implications of these new development initiatives are argued in terms of global
governance systems.
Chapter 2
The Belt and Road Strategy in International Business and Administration:
Corporate Social Responsibility...........................................................................28
Jianyu Chen, Dong-A University, South Korea
Wei Liu, University of Sydney, Australia
Along with the acceleration of “One Belt and One Road” CSR progress, more
Chinese companies possess adequate CSR performance capacity and conditions.
In this chapter, first, the basic concept of CSR has been briefly introduced and the

overviews are mainly stated including the concept, development, and current situation
under the Chinese backdrop. Second, the current development of CSR, risk of the
CSR, and CSR strategies of Chinese enterprises under the backdrop of Belt and
Road Initiative will be introduced. Third, the responsibility of CSR of state-owned
enterprises under the backdrop of Belt and Road Initiatives will be mentioned with
main reference of the social responsibility reports of state-owned enterprises as
well as news reports. Fourth, classic case (China Communications Construction)
will be used to analyze the CSR of Chinese enterprises under the backdrop of Belt
and Road Initiatives.
Chapter 3
The “Outgoing Strategy” of Chinese Companies.................................................52
Tim Wong, City University of Macau, China
The globalization of economics and China’s accession to the World Trade Organization
(WTO) have brought new opportunities and challenges to Chinese enterprises.
Taking the sense of globalization, China is participating in global resource allocation,
expanding and utilizing the market on the global scale, actively participating in
international division and cooperation, and implementing international operation
are important steps for Chinese enterprises to go abroad and seize the initiative in
the global economic competition. In China, the strategy of “going out” is still at the
initial stage. Compared with the developed countries, there is still a large gap between
China and other developed countries in terms of investment amount, enterprise scale,
and internationalization. China enterprises can adapt to the changing environment
of international market; the key is to improve the competitiveness of enterprises in
the international market, which is a crucial step in expanding Chinese enterprises’
international market.
Chapter 4
The Study of Intellectual Property Protection System: Under the Context of
“One Belt One Road”............................................................................................58
Dongjuan Lv, City University of Macau, China
Ying Chen, University of Malaya, Malaysia
The “One Belt One Road” strategy is the abbreviation of “Silk Road Economic
Belt” and “21st Century Maritime Silk Road.” In September and October of 2013,
Chinese President Xi Jinping proposed to build the cooperation initiative of “New
Silk Road Economic Belt” and “The 21st Century Maritime Silk Road.” President
Xi Jinping projected to establish the “21st Century Maritime Silk Road” during his
visit in Indonesia in October 2013. Finally, the National Development and Reform
Commission, the Ministry of Foreign Affairs, and the Ministry of Commerce

cooperatively issued the “Vision and Action for Promoting the Construction of
the Silk Road Economic Belt and the 21st Century Maritime Silk Road” on March
28, 2015. The “One Belt One Road” countries were key areas of cooperation in
the context of China’s policy in communication, road connectivity, smooth trade,
currency circulation, people’s mutual understanding, strategic coordination to
strengthen bilateral and multilateral teamwork, and corresponding development.
Chapter 5
Research on Protection and Development of Intellectual Property in China
From the Perspective of “The Belt and Road”......................................................67
Fuda Li, City University of Macau, China
Linling Zhong, University of Nottingham Ningbo China, China
With the continuous upgrading of the economical industry structure and the gradual
optimization of the excess capacity, China has begun to get rid of the name “world
factory” of “processing with imported materials.” However, there are problems still
existing, such as the contradiction between enterprises’ poor independent innovation
ability and consumers’ increasing demands on product quality. Enterprises in China
have the great opportunity to “go out” because of “The Belt and Road” strategy,
but it is extremely complicated in legal system, customs, and social culture, which
means how to use of intellectual property in China coexists risks and opportunities
for enterprises. This chapter focuses on analyzing problems of intellectual property
rights in China and the importance of the protection and development of intellectual
property. In addition, this chapter studies strategies that can be provided for the
protection and development of intellectual property in China from the perspective
of “The Belt and Road.”
Chapter 6
Intellectual Property Protection Strategy Under the Belt and Road Initiative......82
Yong Zhang, University of Macau, China
After the belt and road initiative was put forward, the relevant domestic regions
responded positively and carried out research work in succession, making suggestions
for the implementation and planning of the belt and road initiative. However, the
relevant research work mainly focuses on the political, economic, and cultural
problems existing in the implementation of the belt and road initiative. The research
on intellectual property protection issues has rarely been reported. By analyzing
the intellectual property environment both of domestic and international in which
the belt and road initiative located, this chapter focuses on the intellectual property
protection strategy in the implementation of the belt and road initiative, aiming at
providing reference for intellectual property research under the belt and road initiative.

Section 2
Industrial and Trade Development Studies Under the Belt and Road
Strategy
Chapter 7
An Assessment of the Belt and Road Performance: Based on the Case of
Machinery Shipment From Shanghai to Rotterdam...........................................108
Sedat Baştuğ, Iskenderun Technical University, Turkey
Turgay Battal, Iskenderun Technical University, Turkey
The aim of the chapter is to propose a methodology to illustrate the cost and time
components of door-to-door movement by One Belt and One Road (OBOR) and
traditional routes alongside with modes. The study is concentrated on a case study
and uses established multimodal transport cost model as a research framework.
Interviews with industry practitioners and observation from primary methods of
data collection. The use of multimodal transport cost model is common in the
containerized cargoes. Hence, this study provides an original analysis for OBOR
initiative. The volumes of OBOR shipments are large, with a high value-to-volume
ratio. The research initially confirms that multimodal transport alternatives and
modal combinations may successfully be applied and assess the performance of
OBOR initiative.
Chapter 8
The Analysis on Railway Transportation Competitiveness and Influencing
Factors of Typical Goods in Beijing-Tianjin-Hebei Region: A Case of Coal
Transportation.....................................................................................................128
Shiqi Li, Beijing Jiaotong University, China
Maoxiang Lang, Beijing Jiaotong University, China
Xueqiao Yu, Beijing Jiaotong University, China
Yanling Wang, Beijing City University, China
Xiao Yu, China Academy of Railway Sciences Corporation Limited,
China
This chapter takes the Beijing-Tianjin-Hebei region as the research scope, selects coal
transportation as the research object, and finds out the current situation and supply
capacity of railway transportation in the context of the transportation industry’s active
promotion of transportation structure adjustment. The chapter chooses coal as an
example, bases on the different influencing factors such as transportation distance
and freight rate, combines with the current situation of railway transportation,
quantitatively analyzes the superior distance and competitiveness of typical
cargo railway transportation, and obtains the superior distance between railway
transportation and road transportation the influence degree of various influencing

factors on the sharing rate of railway transportation market. Finally, the chapter
puts forward corresponding measures to improve the competitiveness of railway
transportation market.
Chapter 9
The Development of Electrolytic Aluminum Industry and the Belt and Road
Strategy: A Collaborative Innovation Perspective..............................................150
Gexin Han, City University of Macau, China
Xinyao Li, Northeast Electric Power University, China
Innovation ability is the key to enterprise development. China’s electrolytic aluminum

enterprises have maintained a high growth rate for many years and have become
one of the industries with the highest social contribution rate in the non-ferrous
metal industry. However, a prominent problem in the development process of the
industry is to put less emphasis on innovation and investment. Excessive production
capacity due to blind investment has become a common disease of enterprises, which
has seriously affected their performance. This chapter tries to explore cooperative
motivation, innovation, and development of the electrolytic aluminum enterprise.
The aim is for the enterprise to find source sex power basis, combined with the
strategy of “area,” all the way to the electrolytic aluminum enterprise value influence,
understand all kinds of system to the importance of the synergy of electrolytic
aluminum enterprises, in order to further promote collaborative innovation measures
to provide adequate basis.
Section 3
Regional Case Studies Under the Belt and Road Strategy
Chapter 10
Making Use of Geographic Advantage: Building “One Belt One Road” Vital
City......................................................................................................................164
Zhanwen Zhang, City University of Macau, China
Siwei Sun, Xi’an Jiaotong-Liverpool University, China
The “One Belt One Road” strategy has been fully implemented since 2016, and
the unlimited potential of Macau needs to be developed. The excellent geographic
location enables Macau to be a significant geographic node on the maritime silk
route; the internalized business regulation and advantages in talent enables Macau to
be a significant regulation node of system ensuring the operation of the policy “One
Belt One Road”; the advantages in political aspect enables Macau to be a significant
financial node of the process of “One Belt One Road” financing and management.

Chapter 11
Belt and Road Initiative: The Case of Malaysia.................................................176
Teo Poh Chuin, Tunku Abdul Rahman University College, Malaysia
With the aim of the Belt and Road Initiative in search of synergies with participating
countries, infrastructure development projects are expected to arise incrementally and
will be adapted accordingly to fulfil local regulatory requirements and needs. Malaysia
embraces opportunities brought by the Belt and Road Initiative by penetrating deeper
into overseas market with the availability of rail lines that will drive connectivity
and foster economic growth. The potential of the Belt and Road Initiative lies not
just within the infrastructure sector, but also offers plenty of opportunities for
human capital development, which made available through technology transfer and
knowledge sharing arising from the cooperation between China and Malaysia. While
it is believed that Malaysia will experience a strong growth, this motion definitely
requires a high level of mutual cooperation, understanding, and trust in managing
regulatory, political, and financial risks, as well as challenges involved.
Chapter 12
Opportunities of Tourism Development of Mongolia Under the Belt and
Road Initiative.....................................................................................................200
Huilian Han, Jilin University, China
Hui Li, Jilin University, China
The Belt and Road Initiative has had great impact on the countries on the road. The
China-Mongolia-Russia corridor, as one of the six economic corridors, has seen
rapid progress. In the progress, Mongolia not only plays important role as a bridge,
but it actively participates in the initiative. As a leading industry, tourism has played
an active role in Sino-Mongolian cultural exchanges and trade cooperation and has
become a pillar industry in Mongolia. This chapter analyzes the limiting factors of
Mongolian tourism and points out the new opportunities for tourism brought by the
Belt and Road strategy. Though the analysis of the tourism industry in Mongolia
and of the opportunities brought by the Belt and Road Initiative, the chapter has
important practical significance for the investors of China and Mongolia to correctly
understand the Mongolian tourism industry’s development status and prospects.
Thus, they will strengthen the tourism industry cooperation in the future.
Glossary............................................................................................................. 215
Compilation of References............................................................................... 217

Related References............................................................................................ 237
About the Contributors.................................................................................... 268
Index................................................................................................................... 272
xv
Preface
The Belt and Road Strategy is a development strategy unveiled by the Chinese president
Xi in 2013 and officially proposed by the Chinese government in 2015. This strategy
aims to connect countries along the routes in Asia, Europe, Africa, strengthen the
partnerships, and construct a comprehensive and multilevel interconnected network
to achieve pluralistic, independent, balanced and sustainable development. Through
mapping a clear road map for development, this strategy focuses on economic
and trade cooperation, business development, and infrastructure investment in the
current stage.
The role of the Belt and Road Strategy could be reflected in two aspects: (1)
International Business context. Multinational Enterprises gain benefits from the
strategy and enhance the foreign markets based on policy guidance. (2) Regional
governance and management. Infrastructure construction such as transportation and
services will be invested in less development countries and this will play its role
in different fields and the level of regional administration needs to be identified.
Thus, international business and regional administration under the Belt and Road
Strategy should be a value research issue.
With the emergence of the information and communication age, international
business activities have made extraordinary progress. However, the unstable
environment of internationalization in recent years just brought challenges to the
sustainable development of corporate internationalization strategies, which is reflected
in two aspects: First, the “Brexit” (Britain off Europe) and the U.S. anti-globalization
trade policy have hindered enterprises’ stability and development through free trade;
Second, China-led emerging powers are promoting active international development
strategies, such as “The Belt and Road Strategy” which is interpreted as the new
“Marshall Plan” by some Western politicians.
Since the Belt and Road Strategy has become one of most important programs
embodying economic, regional and political demands in Asian and European
environment, it attracts the strong interest of the governments, enterprises and
research scholars around most countries. However, as the Belt and Road Strategy
Preface
is more likely to be pictured as a mostly geopolitical project with obvious political

intentions, it attracts less attention from scholars in management field, specifically
international business and regional administration.
Therefore, this book is expected to cause wider and divergent concern on program
investment and political support reflecting new theoretical and practical mechanism
of international business and regional administration from professionals, researchers
students and professors working in the topic of the Belt and Road Strategy and the
relative studies in international business and regional administration.
This book contains three sections. Section 1, “International Business Studies
Under the Belt and Road Strategy,” has a total of six chapters. All the chapters
in this section are studied and reviewed through the perspective of international
business such as corporate internationalization and global strategy. Specifically,
Chapter 1 discusses the Chinese development model under the new global situation.
Chapter 2 discusses the corporate social responsibility of Chinese firms and its
development, risk and strategic decision-making under the Belt and Road Strategy.
Chapter 3 discusses how Chinese firms improve the competitiveness to adapt to
the international market. Chapters 4, 5, and 6 are a series of studies focusing on
intellectual property. The chapters discuss the importance of intellectual property
protection, aiming to provide the strategies for intellectual property under the belt
and road strategy.
Section 2, “Industrial and Trade Development Studies Under the Belt and Road
Strategy,” has a total of three chapters. Chapter 7 established a multimodal transport
cost model to analyze the cost and time components of shipping trade under the
belt and road strategy. Chapter 8 discusses the competitiveness of coal railway
transportation in the core area of the belt and road strategy. Chapter 9 explores the
motivation and development of the Chinese electrolytic aluminum industry, aiming
to promote the collaborative innovation combined with the regionalization strategy.
Section 3, “Regional Case Studies Under the Belt and Road Strategy,” has a total
of three chapters, in order to provide more specific cases to enrich the study of the
belt and road strategy. Chapter 10 introduces the Macau as an important geographic
node on the belt and road and discusses how Macau enhances its advantages to
contribute to the belt and road strategy. Chapter 11 uses the case of Malaysia to
discuss the synergistic development effect of the belt and road strategy to promote
cooperation and development of economy, trade, politics and human resources.
Chapter 12 analyzes the Mongolian tourism, pointing out the new opportunities for
tourism which bring by the belt and road strategy.
To conclude, attempts have been made in this book not just to explore the
relationship between international business and sustainable development, providing a
practical and comprehensive forum for exchanging novel research ideas or empirical
xvi
Preface
practices in this topic, and also to contribute to developing theoretical, analytical,

empirical research, comprehensive reviews of relevant research, conceptual
frameworks and case studies of effective applications in this area.
Wei Liu
Zhe Zhang
Jin-Xiong Chen
Wuyi University, China
Sang-Bing Tsai
University of Electronic Science and Technology of China Zhongshan Institute,
China, & Capital University of Economics and Business, China & Wuyi
University, China
xvii
xviii
Acknowledgment
We acknowledge IGI Global for their professional assistance in the publication of

this book, as well as all the chapter authors for their contributions to this book. We
are very grateful to all anonymous referees for their helpful reviewing work. Most
importantly, we acknowledge the financial supports by the National Social Science
Foundation of China (Grant No.17CGJ002), and resource supports by the Wuyi
University and Macau ‘One Belt One Road’ Research Centre at the City University
of Macau and University of Electronic Science and Technology of China Zhongshan
Institute, China and Environment and Sustainable Development Center of China
Civil Aviation University, China and Capital University of Economics and Business,
China and China Academy of Corporate Governance, Nankai University, China.
Section 1
International Business
Studies Under the Belt
and Road Strategy
1
Chapter 1
The China Model in the
Global Economy
Bahar Baysal Kar
Kırklareli University, Turkey
Taha Eğri
Kırklareli Unıversıty, Turkey
ABSTRACT
The purpose of this chapter is to stand against the claim that the same neo-liberal
model emerges in all countries as a result of the competitive pressures arising from
globalization. Countries can experience a globalization pattern that improves their
growth performance and living standards with different policy preferences in the
fields of finance, trade, and investment. The variety of Chinese capitalism is a case
of this situation. In the first section, this Chinese development model with its illiberal
policies first is examined. In the second section, the new development initiatives
and institutional arrangements and their potential effects are discussed. In addition,
the implications of these new development initiatives are argued in terms of global
governance systems.
INTRODUCTION
The dominant power of post-communist world order is US free market capitalism.

With the global financial crisis, new varieties of capitalism has emerged and the
world order has begun to change in favor of the new capitalism models. “Refurbished
state capitalism” (McNally, 2013a), “state-permeated capitalism” (Nölke & Claar,
2013), “strategic capitalism” (Şenses, Öniş & Bakır, 2013) or “state capitalism”
DOI: 10.4018/978-1-5225-8440-7.ch001
Copyright © 2019, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited.
The China Model in the Global Economy
(Bremmer, 2010) represented by emerging market economies such as China,

India, Russia and Brazil is an example of these new models. While these countries
managed to overcome the global crisis quickly, they also became the pioneers of
global growth (McNally, 2013, p.33). Chinese capitalism alone is also portrayed
as a rival to US capitalism. It is frequently discussed in the literature as the rising
power of the global system (Wolf, 2014). Today China’s economy is the second
largest economy in the world and it is even significantly larger than the sum of
Brazillin, Indian and Russian economies. On the other hand, it is also an important
resource for world economy with commodity demand (Wolf, 2014, p. 147). In fact,
the debate on China’s rise in the global system has begun before the global crisis. In
these discussions, Beijing Consensus1 is exemplified2 which reflects the experience
of China’s economic development for the southern countries against liberalization,
privatization and stabilization based on the Washington Consensus (Yağcı, 2016).
On the other hand, China is positioned separately within Asian economies and is
regarded as the pioneer of commercial and economic expansion in East Asia and
other regions. Thus, there are arguments that China replaced the United States
(Arrighi, 2008).
In this study, Chinese capitalism model will be examined as an alternative
capitalism to the liberal economic model and as an alternative specific development
model. Firstly, the characteristics of the Chinese capitalism model will be defined.
Secondly, its different policy preferences in trade and finance will be discussed.
Finally, the reforms which are introduced in recent years as a response to the structural
problems and their consequences in terms of international political economy will be
presented. For this purpose, the “second image” perspective, which underlies that
domestic structures play a critical role in explaining the government’s preferences
for international politics (Ten Brink, 2014; Nölke, Ten Brink, Claar & May, 2015).
In other words, this approach emphasizes domestic socio-economic institutions and
their political affiliation, questioning the externalization of domestic structures and
effectively blending comparative and international political economy approaches.
By looking at the preferences of policy makers in the context of China’s national
development model, it is possible to develop an understanding of how China has
risen within the global capitalist system (Ten Brink, 2014; Nölke et al, 2015).
In this study, China model is analyzed as a variety of capitalism pioneered by
the state, as seen in the types of capitalism such as “refurbished state capitalism
(McNally, 2013a)”, “state-permeated capitalism” (Nölke & Claar, 2013), “strategic
capitalism” (Şenses et al. 2013) or state capitalism (Bremmer, 2010). The main
purpose is to stand against the claim that the same neoliberal model will emerge
in all countries as a result of the competitive pressures arising from globalization.
Countries can experience a globalization pattern that will improve their life standards
and growth performances, with different policy preferences, particularly in the fields
2
of finance and foreign trade (Chang & Grabel, 2004). China is a successful model of
economic development with non-liberal trade and financial strategies and bilateral
and reciprocal agreements with certain countries instead of multilateral agreements
(May & Nölke, 2014). In recent years, the reforms it has developed against certain
problems stemming from the export and investment-side growth model have continued
to exist in the form of state control and non-liberal policies consistent with its own
form of capitalism. In response to these problems, the Chinese government is in an
effort to pursue statist solutions, including efforts to recentralize, standardize and
better regulate various aspects of the political economy without showing a one-sided
dependence on measures of liberalization. These solutions are in line with China’s
balanced follow-up measures of liberalization and policies that are a combination
of efforts to strengthen and maintain state control (McNally, 2013c, p. 48).
STATE CAPITALISM IN CHINA
It is difficult to examine the capitalism emerged in China within firm-centered

capitalism models (Hall & Soskice, 2001) because of its extremely parsimonious
nature (Nölke & Claar, 2013: 34). Witt (2010) analyzed China’s political economy
through the “varieties of capitalism (VOC)” approach, which Hall and Soskice (2001)
introduced to the literature. This approach presents two types of ideal capitalism
in the form of liberal and coordinated market economies. Witt (2010) argues that
China does not comply with them but only resembles a liberal market economy
due to certain characteristics and also argues that there are more than one variety
of capitalism emerged within the national borders of China.
In fact capitalism models focus on the origin and nature of institutional diversity
in developed capitalist societies (Pontusson, 2005, p.164). They are inadequate
to account for the dynamic institutional structure of emerging market economies
that adopt the basic principles of the free market economy model, such as China,
where state ownership in key industries and state control at varying degrees in the
financial sector still persist (McNally, 2013a; McNally, 2013b). On the other hand,
it is not possible to explain differences in the type and degree of neoliberal reforms
with VOC approach in countries like China where the role of the state cannot be
ignored (Schmidt, 2009). Nölke and Vliegenthart (2009) define an alternative type
of capitalism focusing on the interaction of the national political economy and
international factors and they criticize the fact that VOC considers national capitalist
systems as a closed box. Furthermore they claim that societies are embedded within
international economic regulation and global value chain institutions. This criticism
becomes more meaningful when the role of foreign investment and especially the
importance of global production and information networks in small and medium-
3
sized enterprises are taken into consideration in China. Taking these criticisms into
account, it will be a more accurate approach to examine capitalism in China as a
rising market economy on the basis of a theoretical structure that integrates state
action and international economic relations (Ten Brink, 2014).
Despite the ongoing reform process in China since the late 1970s, a variety of
capitalism emerged that could be called state capitalism instead of liberal capitalism.
This system does not rely purely on market and economic liberalization but it uses the
markets pragmatically. Furthermore it is believed that the government is important
in managing and developing the economy (Wang, 2017; McNally, 2013a; McNally,
2013b). The basic characteristics can be summarized as follows.
Firstly, China is a bureaucratic and authoritarian single-party state and for this
reason the variety of its capitalism is called “bureaucratic state capitalism” (Buzan
& Lawson, 2014). Bureaucratic state capitalism arises when the distinction between
economy and politics is blurred and governance is not democratic (Buzan and
Lawson, 2014). But this political structure of China, unexpectedly, has created an
extremely dynamic and centralized structure that supports economic development
(Kroeber, 2016).
In China, the public financial system is dominated by bureaucratic structure
too. At the national level, the National Development and Reform Commission and
the Ministry of Finance are influential actors in the financial system. The approval
of the budget belongs to the National People’s Congress and as it is difficult to
understand and supervise the budget, the public accountability is almost nonexistent.
As an important consequence of this, it creates investment and infrastructure bias
in public expenditures. Expenditure on transportation, communication and energy
has gone far beyond social expenditure, which increases people’s quality of life.
In fact, this composition of expenditures is in line with China’s growth model
based on exports and investments. This is a sign of government’s dominance and
control in the economy. This has also led to an increase in state savings within
national savings. State revenues have turned into savings rather than being spent
on social welfare or local governments that are in difficult situations. This leads
to an imbalance between savings and consumption in China today (Wang, 2017,
p.100-101; McNally, 2013c, p.52).
In addition to this political and financial structure of China, it constantly organizes
state economic enterprises (SOEs) in its management structure. Thus, although the
share of private enterprises is constantly increasing, the share of the public sector
in the economy is still high. The largest corporations in the economy are in public
ownership and the most strategic and profitable sectors of the economy are state-
controlled. In addition, many seemingly private companies are wholly or largely
under state control and are operated by government investments (Balding, 2018;
Wang, 2017; Kroeber, 2016). More specifically state-owned enterprises have a total
4
asset base equal to 208% of nominal GDP in 2016. There are also 174,000 SOEs
in the industry, transport and wholesale sector according to the data of the same
year. According to Balding, “there is effectively no sector a Chinese SOE does not
dominate” (Balding, 2018, p. 64-65).
Since the 1980s, there has been an intensive de facto privatization process in
Chinese industry. Village and town initiatives have emerged in the form of private
entrepreneurship and today they are almost entirely private. Private companies
dominate competitive sectors in cities3. However state ownership is dominant in
non-competitive sectors (public services, transportation, telecommunications, oil
and gas, defense industry, etc.) and plays a supporting and subsidary role in all other
sectors. Thus China’s industrial system seems like a mixed economy (Naughton,
2010, p.442). On the other hand the role of companies with foreign capital is also
important. Therefore Naughton (2010, p. 441) conceives China’s industrial system
as a three-tier system consisting of large central government companies, hybrid
local and foreign companies, and small-scale companies.
The weight of state ownership and investment causes China to differentiate from
East Asian neighbors. For example, in the post-World War II period most of the
companies and banks are private companies in Japan. State ownership and state
investments are not as common as in China. State’s responsibility is limited to the
regulation and control of the flow of resources. Again, although the financial system
in South Korea is state-owned, entrepreneurship is carried out by the private sector
and large family companies are attracting attention (Kroeber, 2016).
China’s top-down, state-led development is accompanied by economic
development mediated by medium and small-sized companies. These companies
use entrepreneurial strategies by creating highly flexible production and information
networks and their efforts mediate the formation of “entrepreneurial network
capitalism”. But this type of capitalism is also based on informal relations between
the state and the entrepreneurs themselves (McNally, 2012; 2013a).
CHINESE ECONOMY IN THE PROCESS OF

NEOLIBERAL GLOBALIZATION
The purpose of this study is to present that neoliberal globalization is only a form of
globalization. When examined in the case of China, it has been argued that different
policy choices, especially in foreign trade, investment and finance, can reveal an
alternative economic development model and globalization pattern (Chang & Grabel,
2004). The period in which China is integrated with global capitalism is a time when
neoliberal globalization gains speed and dominance. On one hand, with the collapse
of the Soviet bloc, the involvement of India, Latin America and a part of Africa in
5
the global trade and investment network, China has become part of a wider trade and
investment network of global dynamism of capital accumulation. On the other hand,
China has gained the opportunity to benefit from increased high-tech investments
in the US in this period and new information, initiatives and business models that
have accelerated in this period (McNally, 2008; McNally, 2012). China is actually
a more open society than the first industrialized countries like Japan, South Korea
and Taiwan. However, for strategic industries, China has benefited from similar
methods used by these countries, such as subsidized investment programs, export-
led growth strategy, stimulating high savings and investment rates, suppressing
domestic consumption, exchange rate and capital controls. In this chapter, these
illiberal policies of Chinese economy and bilateral and reciprocal relations rather
than multilateral agreements with other countries will be examined within the global
trade and financial system. In the face of the threats to the sustainability of these
policies and strategies, efforts to rebalance China’s political economy will be also
be analyzed in recent years.
Trade Strategy
One of the most important determinant that have contributed to the rise of China in
the global economy is undoubtedly export-oriented production. China has become the
“factory of the world” with the labor supply provided by the crowded population and
the production with low cost inputs and it has directed this production to export. Total
trade volume exceeded 3.7 trillion dolar in 2017 and this trade volume is 200 times
higher than at 1978 level4. It is the world’s largest exporter and the second largest
importer with 12% and 10% of world merchandise exports and imports respectively
(Amighini, 2018, p. 17) and the largest competitor of the United States today.
Since the early 1980s, integration into the global system has been largely managed
and gradual. Exports began at a few authorized private export-processing5 zones
along the southern coast of China. By the mid-1980s, export processing became
widespread and a two-stage export regime became evident: Processing export
segment which is open to outside and benefiting from duty free imports and a
domestic export sector that gets high levels of protection through tariffs and non-
tariff barriers (Kowalski, 2010, p. 206).
The export zones that specialize in specific areas (labor intensive, capital intensive
or information technology etc.) to support export-oriented industrialization form
an example of the strategy of promoting industries of state aiming to develop high
technology without giving up the labor-intensive industries by the division of
labor that they set out. Especially in the export zone where information-intensive
industries are located, the government directly intervenes to provide cooperation
6
of universities, firms and state-owned banks for the development of information

technology (Arrighi, 2010, p. 358-359).
In the 1990s, China’s reforms towards the transition to the market economy
accelerated. China has announced and implemented numerous policy reforms to
create the institutional foundations of better functioning commodity, labor and capital
markets in order to become a WTO member. China adopted a number of economic
institutions, such as minimum standards of intellectual property rights and sanction
procedures; mandatory tariff rates, as required by the WTO, and became a member
of the WTO in 2001 (Edmonds, Croix & Li, 2006:3).
China has fully integrate into the global markets and attain a market power
especially depend on low wage costs with the membership in the WTO. The trade
has increased dramatically since 2001. However, despite many policy commitments
to liberalization before membership, some important sectors such as agriculture and
food products, banking, and finance, remained closed to foreign investment and
protected from competition until now (Amighini, 2018, p. 17-18).
The period 2003-2012 has been a statist period and the market reforms have slowed
down considerably (Hilbert, 2014, p.17). The main purpose of the government in
this period was to facilitate the taking back of market share held by foreign investors
in China over the previous ten years (Kroeber, 2016). The liberalization process
has begun to reverse, while foreign investors and importers face barriers to entry
into the market, privileged domestic investors have been supported and protected
by taxes, subsidies and public contracts, and also discriminatory policies against
foreign investors have begun to be implemented (Hilpert, 2014, p.18).
The average tariff rates are still high in China compared to the developed countries.
According to the WTO’s data, the average tariff rates in the US are 3.4%, 5% in
EU countries, and 10% in China in 2017. Compared to developed countries such as
India (48.5%) and Brazil (31.4%), the relatively lower average tariff levels of China
are not a sign of free trade commitments but on the contrary it is interpreted as the
likelihood that the Chinese capitalists will leave the emerging middle class market
to foreign competitors in the coming years is very low (May & Nölke, 2014, p. 10).
The exchange rate policy6 in China is an important indicator of trade protectionism
(Rodrik, 2013; Amighini, 2018, p. 17-18)7. Chinese leaders see the exchange rate not
as a price, set in the market but as a tool for a comprehensive development strategy
(McNally, 2015, p. 716). The government intervenes in the exchange rate to protect
the producers’ profitability, and this policy causes trade surplus in China (Rodrik,
2013). The essence of this policy is to artificially lower the value of Renminbi,
China’s national currency, and gain an unfair advantage in global markets (Wang,
2017). In a way, China creates a current account surplus by subsidizing its exports
and causing imports to be more expensive. In that way, it contributes to global
imbalances (Hilbert, 2014, p.18; Wang, 2017).
7
The pilot free trade zones established for the facilitation of trade in China also
provide insight into the way the reforms are implemented and their process. These
regions do not aim to liberalize trade with other countries, but point to new reform
methods. For Chinese government, they are also unilateral policy trial areas (Yao
& Whalley, 2016).
China’s attitude towards protectionism can also be understood from its attitude
toward various areas of global liberalization in the Doha Round negotiations, which
continue under the WTO framework. “Singapore Issues” designed by developed
countries as the next step for global multilateral trade liberalization in 1996 are
measures of deep integration (Stephen & Parizek, 2015; May & Nölke, 2014). These
measures target four different areas. The first is about the protection of investments
against the discretionary behavior of the host country government and the relationship
between trade and investments. The second deals with the competition policy and
aims to restrict governments from arbitrarily supporting their local companies. The
third aims at restricting the government from giving priority to local or national
producers in the supply of public investments and government spending in relation to
government procurement while the fourth area aims at facilitating trade in the sense
of removing bureaucratic obstacles in trade such as customs procedures. The first
three have been deducted from the agenda of the Doha Round negotiations in favor
of emerging economies, including China, and only the facilitation of trade has been
able to remain on the agenda (Stephen & Parizek, 2015). Stephen and Parizek (2015,
p. 22-23) aimed to measure countries’ support for trade liberalization by scaling
between 0 and 4, while China’s trade liberalization was found to be attitude 2, while
the G7 countries’ pro-liberal attitude was 2.8. This attitude of China is interpreted
by the authors as a result of seeking to harmonize their domestic structures with
international agreements (p.3).
After the global crisis, China has lowered expectations for growth rates to 6.5%
per annum and realized the need to shift from an investment and export-oriented
growth model to a more sustainable and consumption-oriented growth model. For
China, it is the time to move from a low-cost factory to a high-value-added economy.
This is the aim of “Made in China 2025”. (Magri, 2018). However, the Chinese
government still seeks to shape and manage the economy through state-owned
enterprises and other enterprises subsidies and directives. Despite the WTO rules’
aim to limit subsidies, the Chinese trading system will continue to maintain these
constraints (Eichengreen, 2018).
8
Bilateral and Regional Trade Agreements
Compared with post-World War II practices, China seems to prefer bilateral and
regional trade agreements rather than multilateral trade agreements. This behaviour
means a declining role for the World Trade Organization (WTO) (Eichengreen, 2018).
The Chinese government considers free trade agreements both as a method
for opening the country out and as a means of being proactive in the process of
developing emerging global trade rules. China’s free trade negotiations started with
the WTO membership in 2001. China, which signed 13 FTAs by April 2018, signed
six of them after 2013 in Xi Jinping administration period (Tiezzi, 2018, p. 40).
When the signed agreements are examined, China appears to have signed the FTAs,
especially with developing countries. One of those agreements is the multilateral
agreement with ASEAN countries, which only accounts for 2.5% of China’s total
trade. Trade agreements with countries such as Pakistan, Peru and Maldives are
more political for China than for economic reasons. Negotiations with developed
countries are conducted in a wide area including the environment and labor, which
make them difficult to conclude. On the other hand, negotiations from developing
countries give China the power to determine rules and provide a kind of education
for economy bureaucrats (Tiezzi, 2018, p. 45).
Free trade agreements have become increasingly prevalent in China’s economic and
foreign policy. President Xi describes the FTAs in an explanation he made in 2014 as
a “necessary choice for comprehensively deepening reform and constructing a new
system of open-style economy” and an “important method for China to proactively
handle foreign relations and achieve external strategic goals” (Tiezzi, 2018, p. 45).
It is clear that in the plans and programs published by the Chinese government at
different levels after 2012, explicit referrals were made to the FTAs. In this context,
diplomatic as well as economic goals are emphasized. It is aimed that China will
be active in determining the rules of global trade by becoming active in free trade
agreements by connecting countries in the region.
Dependency of the Chinese economy to trade is making it vulnerable to global
fluctuations. The decrease in global trade or the increase in protectionism is damaging
to the Chinese economy. New policies need to be developed to reduce this fragility.
This was mentioned in a report prepared by the Ministry of Commerce in 2010. As
the second largest economy, it is emphasized that China should be an active leading
country, not a passive country that follows the existing rules both in trade and in
investment. The concept of “strong trading power” (maoyi qiangguo) was used to
describe this vision (Heath, 2016, p. 175).
9
Investment Strategies
In addition to international trade, foreign direct investment is also a component of

global economic integration in China. However Chinese international regime is less
open to inflows and outflows foreign direct investment and it has been applied a
“selective openness” (Eichengreen, 2018; Amighini, 2018, p. 31).
In China, investment strategies of companies are driven by the macroeconomic
preferences of state units. For this reason, the state acts as an intermediary for
large amount of credits, with development banks controlled by the government or
ministries. With such credit support, companies have become more competitive
against foreign companies. The state can also act as a major consumer of goods
and services, particularly through infrastructure and public procurement. Foreign
companies are thus excluded from the market (May &Nölke, 2014)
The inflows of foreign investment is seen as a modernizing factor as long as it
does not harm the superiority of the national capital in China’s mercantilist model
and serves the interests of the society (Nölke & Claar, 2013, p. 42; Arrighi, 2010,
p. 357). In the economic development model of China, foreign direct investment
has played a more important role than societies like Japan and South Korea.
Since the early 1990s, more than one third of exports have been made by foreign
companies. Reached the highest level in 2005 with 58%. Moreover, the share of
foreign companies in the exports of China’s high-tech products is quite high. Over
the period 2000-2012, more than 80% and almost three quarters today are exported
by foreign companies8 (Kroeber, 2016).
Using the attractiveness of market size and the bargaining power associated
with it, the government regulates foreign capital inflows. Medical institutions,
automotive manufacturing, higher education institutions, brokerage companies,
shipping agencies, airline companies, telecommunication companies and security
companies are among the leading companies exposed to certain constraints by
various investment instruments (Huang, 2017: 59; Lee, Jee & Eun, 2011:493). The
main purpose is to protect certain industries or domestic companies. In this respect,
the Chinese government restricts or prohibits the foreign direct investments in some
strategic sectors or industries that may jeopardize national economy. For this reason,
foreign investors are not subject to equal treatment in accessing or doing business
in these specific areas (Chen, 2011:95).
Strategically the most important expectation from foreign investments enter
the country is technology transfer. The government actively adopts the principle
of trading the market for technology, introducing conditions such as technology
transfer and joint venture to the multinational corporations. As a matter of fact, since
1978 more than 80% of foreign capital investments, particularly in the automobile,
chemical and electronics industries, have been accepted as based on this principle
10
and the government puts pressure on technology transfer to local partners in these
industries (Lee, Jee & Eun, 2011, p. 493). Thus, foreign direct investment companies
contribute to the spread of knowledge and qualified workforce, while companies
in China learn from them. This process is called parallel learning (Lee, Jee & Eun,
2011, p. 493). However, the weak legal structures and sanctions for the protection
of intellectual property rights not only deter the entry of foreign capital with high
technology, but also affect the decisions of foreign investors to bring technology.
This is one of the main reasons for the low foreign investment from the industrialized
countries (Chen, 2011).
The central authorities hindered the outflows of foreign investments in China
during the 1990s. However since the adoption of the “Go Global Strategy” initiative,
there has been a significant increase in foreign investments made abroad. “The
Government, together with the China Council for the Promotion of International
Trade (CCPIT), has introduced several schemes to assist domestic companies in
developing a global strategy to exploit opportunities in the expanding local and
international markets” (Amighini, 2018, p. 32). The determinants like high savings
rates, global financial imbalances and the reduction of investment demand within the
country, have been influental in increasing outward investments. China has reduced
tight controls on its reserves against the increase in foreign reserves. Funds have
begun to be encouraged for overseas investments and the creation of world-class
companies and brands has started to be frequently spoken as part of this policy
change (Lee, Jee & Eun, 2011, p. 496; Zhang, 2015, p. 124).
It is possible to observe illiberal characteristics even when direct overseas
investments are made, similar to foreign investment in the country. First of all, an
important part of China’s foreign investments was made by state-owned enterprises
(Sauvant & Nolan, 2015, p.3). Foreign direct investment made by China, on the
other hand, is promoted by using specific tools. Various financial support, priority
access to financial resources, accelerated approval, tax return, and investment advice
are just a few of these incentives.
A New Trade and Investmet Strategy: ‘One

Belt, One Road’ Initiative (OBOR)
In the years following the global crisis, the slowdown in the Chinese economy has
led to the need to shift from an investment-based economy model to a consumption-
based economy model. In addition, a large external market requirement has emerged
in which the accumulation of excess industrial capital in the past periods will be
exported. These are internal and external factors that cause China’s economic
development model and foreign policy to change (Zhang, 2015). ‘One Belt, One
Road (OBOR)’ initiative, is China’s external response against these changing growth
11
dynamics (Dollar, 2015, p.163), a new trade strategy (Eichengreen, 2018) and a
signature for international economic policy (Zhang, 2015, p. 123).
OBOR’ initiative is the name of two new trade routes called ‘Silk Road Economic
Belt’ and ‘Maritime Silk Road of the Twenty-First Century’. “Silk Road Economic
Belt” and “Maritime Silk Road of the Twenty-First Century” which are among the
most ambitious initiatives in the international arena are the project of modern times
to establish land and sea silk roads. This project, linking Central Asia and Europe
by land, North, Southeast and South Asia by sea, is a new trade and economic
order proposal for developing countries under China’s leadership. According to
Eichengreen (2018) as “a hub-and-spoke system, with China the hub and countries
on its periphery the spokes” it is sign of “re-shaping the global trading system”
for China. The OBOR initiative has drawn attention to the economic magnitude
that it has proposed and the new political implications it will bring. In this context,
it seems that China, in particular, has made great efforts to realize the project by
taking serious steps both in the political arena and in other fields (Yu, 2017, p. 354).
President Xi Jinping explained the idea of Silk Road in his speech in Kazakhstan
in September 2013, while Maritime Silk Road project was announced in Indonesia
in October 213. A year later, at the Asia-Pacific Economic Cooperation (APEC)
meeting in November 2014, China announced it had created a $ 40 billion Silk
Road fund (Aoyama, 2016, p. 5). China embodied this idea in a short span of time
like one year, and although many countries are involved in the project, China has
proven itself to be the driving force behind the project with the financial resources it
allocates. Lin ve Wang (2015, p. 20), claims that the OBOR project reflects China’s
vision of expanding trade, reform and economic development and is an important
solution to crises by increasing total demand through infrastructure investments
and raising productivity in the long run. On the other hand, it is possible to read
the OBOR project as a new form of globalization:
China’s Belt and Road Initiative (BRI) is designed to lay some of the foundations for
a new inclusive phase of globalization. The proposal has already received a great
deal of support, leading Fukuyama to argue that it is part of ‘an historic contest . .
. over competing development models . . . between China . . . and the United States
(US) and other Western countries . . . [whose] outcome will determine the fate of
Eurasia for decades to come’
The Chinese vision differs in significant ways from neoliberal/Washington Consensus

globalization and some other recent international initiatives in that it is inclusive.
China’s emphasis is on strategic international economic partnerships and multilateral
credit to address investment, infrastructure, employment and economic development
(Liu & Dunford, 2016, p. 325).
12
The OBOR initiative is the largest project of the last century in terms of area covered
and economic magnitude. The basic principle of OBOR is to enhance connectivity
through multi-model transport corridors weather on ‘land’ or through ‘Sea’ that
lead to economic integration, free flow of goods and services that enhances trade,
commerce, economic activity including promotion of people to people exchanges
(Minghong, 2017, p. 7). It covers all the Eurasian geography from East Asia to
Western Europe. It aims to merge the South Chinese Sea and the Indian Ocean with
the West Pacific coasts. Thus, it concerns about 63% of the world population that
is 4.5 billion people. This initiative, which encompasses 64 countries, combines a
third of the world’s GDP (Zhang, 2015, p. 123). Moreover, in the official action plan
prepared in March 2015, OBOR was declared open to all countries thus a globally
inclusive and ambitious plan was put forward:
The Initiative is open for cooperation. It covers, but is not limited to, the area of
the ancient Silk Road. It is open to all countries, and international and regional
organizations for engagement, so that the results of the concerted efforts will benefit
wider areas.
The OBOR project has not started as a “plan” or “strategy” but as “initiative” by
the Chinese government. The vision aims to encourage all countries that wish to be
included in this movement as stakeholders, rather than being a project of the Chinese
state. It also aims to be a pluralistic structure without recommending a single model
and policy proposal. In this way, OBOR also includes the use of existing bilateral
relations, multilateral agreements and cultural differences without establishing a
new mechanism and a uniform corporate entity. OBOR, which advocates common
interests on the path of economic development and advocates a win-win strategy, is
trying to cover the characteristics and interests of all countries (Minghong, 2017, p. 8).
OBOR’s most comprehensive purpose is to create a globally free trade system.
This aim is contrary to the current system of China, although it reflects the West’s
liberal internationalist economic doctrine. As a matter of fact, China has never had
a liberal internationalist tradition in its history and it would be an irony to think it
will be at this point (Zhang, 2015, p. 123-124).
The Belt and Road Initiative has recently helped to consolidate Beijing’s image
as a net direct and financial foreign investor, working to establish what has been
labeled “globalisation with Chinese characteristics”, which seems more an outward
expansion of Chinese influence abroad than a step towards a truly multilateral
approach (Magri, 2018, p. 10). Certainly, the Chinese government has both internal
and external priorities in the OBOR initiative. The first goal is to transfer the excess
capacity to developing countries resulting from high economic growth performance.
It is thought that the capacity surplus of sectors such as cement, steel and railways
13
will be used as a result of increasing infrastructure investments. Secondly, it is aimed

to generate more income in the long run by directing the accumulation of Chinese
capital to infrastructure projects instead of treasury bills. Thirdly, energy supply
security will be ensured through the established secure trade network. Energy flow
is highly important for China, which is dependent on oil and natural gas imports.
Regional development differences, poverty in the interior and western regions, despite
the development of coastal cities, remain as a major problem for China. As the fourth
objective of the OBOR initiative, the Chinese government seeks development by
providing economic vitality in poor regions. Finally, this project will ensure that
China is an authority globally. It is a response to the free trade agreements that the
US try to do with Europe and other Asian countries (Zhang, 2015, p.124–125).
In the Barack Obama period, the US government initiated free trade agreements
with the Pacific countries and the European Union. The Trans-Pacific Partnership
(TPP) and the Transatlantic Trade and Investment Partnership (TTIP) negotiations
foresee the adoption of a number of rules, such as development of multilateral free
trade and patent rights. Even if these agreements were aimed at improving trade, they
included a number of negotiations. The parties were strictly tied to the rules of the
agreements and the third parties’ participation was based on deals and negotiations.
However, the OBOR initiative has become a serious competitor to the TPP and TTIP,
by recognizing the participation of all countries openly, foreseeing equal participation
of the countries, and beyond all of that, with its infrastructure investments which
were promising especially to the developing countries (Du, 2016, p. 39).
OBOR’s vision and proposed working structure offers a new cooperation and
integration proposal. OBOR is a different globalization proposal in the 21st Century,
that provide countries an option to choose the areas they are willing to cooperate
with, enabling participation voluntarily in the project, making infrastructure
investments that will contribute to the development of their countries, and operating
with both bilateral or multilateral agreements, inclusive and open relationship
proposals. (Tang, Liu, & Xie, 2017, p. 387). The model of trade and international
economic relations that OBOR has proposed offers considerable ambiguities besides
providing an opportunity for everyone to gain. The problem of coordination, the
ambiguity of countries’ loyalties, the lack of a strong leading state perception, and,
most importantly, the question of who finances infrastructure investments stay as
a problem. In addition to that, Chinese companies’ lack of overseas experience,
distrust to the Chinese technology, and the economic and political pressures of the
US and other western countries can be added to these problems (Nataraj & Sekhani,
2016; Tang et al., 2017).
14
Asian Infrastructure Investment Bank (AIBB)
The establishment of the Asian Infrastructure Investment Bank (AIIB) is based on

the Asia-Pacific Economic Cooperation Summit held in Bali in October 2013. At this
meeting, China proposed the establishment of a new multilateral development bank.
It has been declared that the bank will give priority to the financing of infrastructure
projects, especially in Asian countries and neighboring countries. With the agreement
signed in Beijing in June 2015, the Bank was established with 57 founder members
and started its activities as of December 25, 2015. However, the membership of the
bank has been left open to other countries. AIIB’s Articles of Agreement create two
classes of membership: regional and non-regional members. According to the AIIB
Articles, regional members hold 75% of the total voting power in the Bank (Weiss,
2017, p. 1). In the management structure, the voting rights are distributed according
to the capital structure. Accordingly, India has a share of 7.51%, Russia 5.93% and
Germany 4.15%, while China has a share of 26.06%, which is well above the others.
This structural status gives China more power than the US has in the World Bank or
Japan has in the Asian Development Bank. In addition to that, China has the right
to veto decisions in the following areas; increasing the bank’s capital, increasing the
capital subscription of a member, expanding the operations of the bank, changing
the size of the board of directors, changing the structure of the board, appointing or
removing the president, suspending a member, terminating the bank and distributing
its assets, and amending the Articles. At the project level decisions, although China
does not have an official veto right, it has the power to decline automatically, due
to its voting share since decisions must be taken with 75% of the vote (Callaghan
& Hubbard, 2016, p. 129). China has pioneered both the establishment and the
execution processes of this bank, as it is in the OBOR initiative. China has pledged
to pay half of the $ 100 billion of the bank’s founding capital.
The United States is not a member of this bank while England and France are
members. The United States is openly opposed to the AIIB, which will compete
against the World Bank and the IMF, the cornerstones of the global financial
architecture. A New York Times report had alleged that the American administration
tried to prevent the AIIB’s foundation and tried to persuade the allied countries not
to become members (Perlez, 2014).
The establishment of a multilateral development bank has claim with two sides.
While one side opposes the US’s global economic leadership, the other side reveals
the will to change the global financial architecture. The current system, led by the
World Bank and the IMF, is leading the international economic system and the US
administration is in its captain’s corner. The American government holds significant
powers with its veto rights. China, which wants to have more voice in the global
15
system with its growing economy, demands more votes in the IMF and the World
Bank. Although a positive response was given to this demand in 2010, the US
Congress resisted to this decision and it took longer to implement. This prolongation
became a source of motivation for China’s search for an alternative (Layne, 2018,
p. 103). This initiative, which China has done, has created a new formation in
which China is at the center against the Bretton Woods Institutions. China, which
wants to transfer its economic achievements to the global scene, wants the center
of gravity to change to its own advantage. The US administration claims that new
financial institutions will not be as successful as existing ones: “Washington said
that its opposition to the AIIB was based on US doubts that the new institution would
adhere to the same environmental, governance, lending, transparency, labour and
human rights standards as the IMF, World Bank and Asian Development Bank”
(Layne, 2018, p. 103). On the other hand the treasury minister Jack Lew argued that
US international credibility and influence are threatened by congressional delays
in IMF reforms and that reforms must be approved to sustain the IMF leadership
(Donnan & Dyer, 2015).
As mentioned earlier, the OBOR initiative is important for China’s political and
economic interests. However, the revival of the historical silk road requires a serious
political coordination and investment (Callaghan & Hubbard, 2016, p.120). In this
context, the Chinese government closely linked the AIIB with the OBOR initiative
during the foundation period. AIIB has been put forward for the financing of the
OBOR initiative, which envisages commercial cooperation in a vast geographical
area from Europe to China and envisages high levels of infrastructure investments.
However, with the inclusion of Western countries such as the United Kingdom during
the preliminary negotiations, the Chinese government has begun to differentiate the
AIIB from the OBOR initiative. As a result of US rivalry and opposition, China
has moved AIIB into a complementary position to being an alternative to the World
Bank and Asian Development:
In November 2014, shortly after China signed the MOU to begin negotiations,
Chinese President Xi said that “China’s inception and joint establishment of the
AIIB with some countries is aimed at providing financial support for infrastructure
development in countries along the ‘One Belt, One Road’ and promoting economic
cooperation.” This view of the AIIB’s role was reinforced by the spokesperson for
the National People’s Congress in March 2015, “AIIB and the Silk Road Fund are
both created for the better implementation of ‘One Belt, One Road.’” Beginning in
mid-2015, Chinese officials created more distance between the rapidly expanding
AIIB and China’s OBOR strategy. In June 2016, during a meeting with global
executives, the AIIB President Jin Liqun clarified China’s position, saying that
while the Bank would support OBOR projects, the AIIB was not created exclusively
16
for this initiative. Speaking in Washington, DC alongside the World Bank’s spring
2016 meetings, President Xi said “We would finance infrastructure projects in all
emerging market economies even though they don’t belong to the Belt and Road
initiative.” (Weiss, 2017, p. 6)
Financial System
The financial system in China is a system in which banks are dominant and the vast
majority of these banks are directly audited by the state (Prasad, 2016). Although the
banking system (Kroeber, 2016), which accounts for 80% of the financial resources,
is stated to have evolved into a competitive market in recent years, the market share
of fully owned state banks in the market is 8% and the “equitized” commercial
bank share is 49.2% in which the largest shareholder is the central government. The
market share of these banks is close to 60%, with clear evidence that these banks
are under government control in China (Martin, 2012; Allen, Qian & Gu, 2017)9.
Because the global financial markets do not play an important role in financing new
investments, the Chinese model differs greatly from the liberal market economies
and is more like market economies in coordination with East Asian economies (May
& Nölke, 2014; Koeber, 2016).
The central bank, which is at the center of the banking system, actively seeks
stability in foreign financial relationships through the accumulation of reserves to
prevent exchange rate volatility (Ten Brink, 2014; May & Nölke, 2014). Reserve
accumulation is a by-product of policies aimed at preventing the appreciation of
national currency (Wang, 2017), as well as the assurance of national strength and
security in China. As a part of China’s export-based development strategy, it has
tightly limited its currency appreciation by accumulating reserves. Despite regulations
restricting the entry of foreign capital, speculative capital entered the country with
the expectation that the Renminbi would gain value in the future, and led to an
excessive increase in reserves (Krugman, Obstfeld & Melitz, 2017:690).
The “financial repression” created by keeping deposit rates at or below inflation
level is a key tool for maximizing the government’s control over financial resources
(Kroeber, 2016), and this policy, combined with the characteristics of the financial
system in China, has made a significant contribution to the increase of investments.
One of the other two important deteminants contributing to the increase in tendency
of investments is the large-scale supervision of the capital account (Prasad, 2016).
For this reason, households in China cannot invest in foreign currency shares,
bonds or other financial assets. Investments are limited to assets in the country. On
the other hand, there are various violations in China such as insider trading, front
running. Therefore, investors do not see domestic stocks as an investment instrument
(Lardy, 2012, p. 236).
17
Financial pressure is also a way for the government to transfer funds from the
savings owners to the companies (Wang, 2017; Kroeber, 2016). The fact that the
government has a considerable power in the functioning of all kinds of banks makes
it easier for the financial resources to be channeled to the areas preferred by the
government. The government’s priority in this sense is the SOEs. The government’s
interest policy has caused resource transfers from households to companies. According
to estimates of a study done, this transfer is between 5-7% of the GDP and gives a
great advantage to the SOEs. This intervention of the state’s financial institutions
is also the main reason for the high investments of the SOEs and the extraordinary
profits (Wang, 2017, p.100).
The Chinese government provides subsidized credits not only to state-owned
SOEs through the banking system but also to companies preferred as part of the
central government strategy. These loans, which are given to increase the competitive
power of companies, are seriously controversial due to the accusation of China’s
unfair competition in world trade (Martin, 2012, p. 37).
Although it has taken selective and prudent measures to remove state control,
China still has a comprehensive capital control regime. Although restrictions on
capital inflows and outflows have been loosened, they have not been removed
(Prasad, 2016), and financial asset and company equity asset sales are limited. In the
Chinese stock market, over 60% of the existing assets are held by the state (Allen,
Chakrabati, De, Qian & Qian, 2010:156). Therefore, the Chinese stock market is
designed to provide capital for a few private companies controlled by state block-
holders (May & Nölke, 2014).
Renminbi as an International Currency
China strives to transform Renminbi into international currency. Especially since the
2008-2009 crisis, it has increased its efforts towards this purpose. The most important
motivation behind these efforts is to reduce dollar dependency. Rumors about the
US’s efforts to reduce the debt burden by suppressing the value of the dollar have
also raised concerns about the value of China’s excess reserves. On the other hand,
dependency on the dollar in trade worries authorities. Because of the 2008 crisis,
the decline in China’s exports was not only due to the contraction in total demand,
the restrictions on the access of importers to trade financing and the freezing of
loans also paused exports (Bottelier & Dadush, 2011). Therefore, the transformation
of Renminbi into a currency of trade agreement will reduce the potential impacts
of such shocks on China, reduce exchange rate risk in exports, reduce or eliminate
the costs of protection against this risk. On the other hand, making the investments
in this currency will reduce the risk of exchange rate for Chinese investors seeking
18
funds for international investments. Moreover, the internationalization of Renminbi

will help to reduce China’s excessive reserves (Bottelier & Dadush, 2011).
In line with these goals and based on the model of economic development, China
has undertaken the supervised internationalization of Renminbi without liberalizing
the capital account as a whole (McCauley, 2011; McNally, 2015; Kirshner, 2017).
A paper published by the president of the Peoples Bank of China suggests that “the
definition of convertibility of the capital account is open to debate and that flexibility
must be provided as to how the standards should be set”, which is consistent with
the aforementioned trend (Kirshner, 2017, p. 190). China tends to be an alternative
to the US model by maintaining state control over its policies, domestic financial
system, capital flows and exchange rate. This tendency shows that China’s capital
account control will continue and that the country’s financial reforms will proceed
cautiously (McNally, 2015, p. 717). Kirshner (2017, p.190) summarizes this pursuit
that challenges in a way the current monetary system and the US model: “To build
the infrastructure that will increase the internationalization of the Yuan, spread its
use as a tool, and encourage other central banks to keep reserves in the Renminbi
and in the meantime, to protect some capital controls and other restraint devices over
other markets. China intends to encourage it through bilateral exchange agreements
that it has actively engaged in”. Renminbi’s internationalization regenerates some
aspects of the internal reforms of Chinese capitalism, such as policy experimentation
and institutional hybridization (McNally, 2015, p. 717).
CONCLUSION
The purpose of this paper is to introduce the “globalization with Chinese

characteristics” (Eichengreen, 2008). In accordance with the Chinese capitalism
model, it is an alternative and successful development model with different policy
choices in the fields of trade, investment and finance. Although the willingness to
continue globalization is often expressed in policies and expressions, it constantly
applies protectionist measures. The Chinese economy is controlled by the state. He also
prefers regional and bilateral agreements rather than multilateral negotiating rounds.
In recent years, as a response to the changing growth dynamics and some structural
problems, China has adopted a new trade initiative and institutional arrangements.
These changes have fueled the debate over China’s new hegemon of the international
order. Especially the attitude of the US administration towards protectionism puts
China on the foreground with these new strategies in the international arena.
19
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ENDNOTES
1
Beijing Consensus is a concept that is proposed by the Time editor, Joshua
Cooper Ramo, against the Washington Consensus and it is a term that is
sometimes used instead of the term China Model (Jiang, 2011, p.339). Ramo
(2004, p.3-4) defines the Beijing Consensus as follows: China is marking a path
for other nations around the world who are trying to figure out not simply how
to develop their countries, but also how to fit into the international order in a
way that allows them to be truly independent, to protect their way of life and
political choices in a world with a single massively powerful centre of gravity.
Unlike the Washington Consensus, it does not offer a uniform solution for every
situation. Economic development can vary from country to county and it is
pointless to expect similar results by presenting the same policy prescriptions.
It is innovative and experimental. Furthermore “the Beijing Consensus still
holds tightly to his pragmatic idea that the best path for modernisation is one
of “groping for stones to cross the river,” instead of trying to make one-big,
shock-therapy leap. Most important, it is both the product of and defined by a
society that is changing so fast that few people, even those inside China, can
keep up with it” (Ramo, 2004, p.4).
2
According to Naughton (2010, p. 437) The Beijing Consensus does not
accurately convey China’s economic development process and does not represent
a compromise between economists and policy makers in China. Moreover,
although there are lessons to be drawn from China’s economic development
experience, these are not features that can easily be copied by other countries
and there are specific characteristics related to the institutional structure of
the country.
25
3
New institutional approaches, examining the emergence of capitalism in China,
are against a state-centered interpretation. They underline the importance of
the reform coming from the base, which was one of the two different reform
processes started from the late 1970s. According to them, China is not a project
that the government has previously designed and conducted. The first reform
was made under the leadership of the state with targets such as agricultural
development, heavy industrial transition to light industry, decentralization of
the economy and greater autonomy of local actors, development of state-owned
enterprises. The second reform has emerged spontaneously and has evolved
through the influence of various elements, such as self-employed, town and
village initiatives, Special Economic Zones. It is this second reform that has
led to a capitalist transition in China, which brought a dynamic private sector
and a strong resistive market forces to the Chinese economy without much
change in the state sector (Coase & Wang, 2015, p. 293-324).
4
Deng Xiaoping has started the country’s policy of reform and openness in
1978.
5
Processing export is based on the export of finished products by processing
imported and intermediate products (Wang, 2017, p. 89).
6
The question of why exchange rate policy creates global imbalances by creating
surplus is a controversial issue in the literature. Wang (2017, p. 88) claims that
China’s increasing surplus against the United States and the EU is a result of
the collective contribution of East Asian economies. He also thinks that it is
wrong to focus only on exchange rate policy in China to reduce the current
account deficit. Because the exchange rate policy is part of China’s export-
oriented development policy and the exporting impulse is explained by the high
saving and low consumption tendency of the society. Corden (2009) argues
that the exchange rate policy alone does not explain China’s current account
surplus and that the current account surplus in this country has little effect on
the emergence of the global crisis. Kroeber (2016) shows with numerical data
that artificially undervalued exchange rate is a lesser determinant of export
growth. In the period of 2001-2010, when the exchange rate was extremely
undervalued, the share of China’s global exports rose by 1.1%, but rose from
5% to 15% despite the increase in labor costs during the period 2010-2013,
when foreign exchange was left to fluctuate.
7
China’s approach to exchange rate policy is experimental and gradual as it
is in other strategies. In 1997-2005 period, Renminbi was fixed to dollar and
beginning from 2005, a gradual transition to flexible exchange rate system
was foreseen (McNally, 2015; Prasad, 2016). The advantages gained from the
gradual exchange rate policy under state control are not limited to the increase
26
in exports. It contributed to the control of inflation in the country and to the

stability and predictability of exchange rate (McNally, 2015, p. 715).
8
China’s strategy for foreign capital investments has been achieved through
the interaction of existing conditions in the international system and political
preferences. The period when the Chinese economy was integrated into the global
system was not a period in which conditions would allow the establishment of
large powerful corporations that would lead the export similar to the situation
created in East Asian countries by protectionism. The period when the US
sees East Asian countries as ally, and thus, unlike its privileged position in
accessing US markets and technology, China’s opening up to world markets
is a period of accelerated neoliberal globalization. It is a necessity for China
to release the access to its own market in a global trading system where the
US and Europe dominate world trade (Kroeber, 2016; McNally, 2012).
9
Although the capital markets have started to play a bigger role in financing
investments since 2010, the political pressures of both central and local
governments on banks have been continuing while the credit decisions are
being made (Kroeber, 2016).
27
28
Chapter 2
The Belt and Road Strategy
in International Business
and Administration:
Corporate Social Responsibility
Jianyu Chen
Dong-A University, South Korea
Wei Liu
ABSTRACT
Along with the acceleration of “One Belt and One Road” CSR progress, more
Chinese companies possess adequate CSR performance capacity and conditions.
In this chapter, first, the basic concept of CSR has been briefly introduced and the
overviews are mainly stated including the concept, development, and current situation
under the Chinese backdrop. Second, the current development of CSR, risk of the
CSR, and CSR strategies of Chinese enterprises under the backdrop of Belt and
Road Initiative will be introduced. Third, the responsibility of CSR of state-owned
enterprises under the backdrop of Belt and Road Initiatives will be mentioned with
main reference of the social responsibility reports of state-owned enterprises as
well as news reports. Fourth, classic case (China Communications Construction)
will be used to analyze the CSR of Chinese enterprises under the backdrop of Belt
and Road Initiatives.
DOI: 10.4018/978-1-5225-8440-7.ch002
The Belt and Road Strategy in International Business and Administration
Figure 1. The pyramid of corporate social responsibility
CORPORATE SOCIAL RESPONSIBILITY(CSR)

AND CSR IN CHINA
Corporate Social Responsibility (CSR)
Despite the fact Corporate social responsibility (CSR) is one of the most prominent
concepts, it is still difficult to give a commonly accepted definition (Turker, 2009).
Indeed, researchers have proposed a plethora of expressions to refer to CSR. Such
as corporate citizenship, business ethics, sustainability, etc.
Carroll (1979) is an early pioneer in this area, has recognized four dimensions
of CSR and developed the Corporate social Performance Model. As proposed by
him, CSR specifically consists of four types of corporate social responsibilities
in economics, law, ethics and philanthropy. he also elaborately explained the four
responsibilities in a pyramid structure. (Figure 1) Besides, he found that a company
has four stakeholders (including society, employees, customers, government) or
interest groups.
In addition, there exist many other definitions on CSR given by authoritative
international organizations. For instance, as stipulated by ten principles and
requirements in “the UN Global Compact”, companies should make efforts and
perform internationally acknowledged norms to defend human rights, labor standards,
environment and prevent corruption. CSR regulated by OECD “aims to make
29
contributions to the development of economics, society and environment with the

goal of sustainability”.
As a result, in combination with mainstream stakeholder theories, CSR demands
companies to assume legal responsibilities for shareholders and employees while
earning profits, and in the meantime bear responsibilities for consumers, communities
and environment. CSR compulsorily requests companies to surpass the traditional
philosophy of taking profitability as the sole goal and pay attention to human values
as well as contributions to environment, consumers and society in the production
process.
CSR in China
The study on CSR in China started in the 1990s. In the very beginning, scholars mostly
introduced the general theoretical results and practical experience in the west and
further attempted to establish a theoretical system with Chinese characteristics. Due
to the high congruity between CSR and the harmony and sustainable development
philosophy of China, there is few controversy about CSR in China. Scholars generally
consider that companies ought to positively perform social responsibilities.
Yuan (1990) took the lead in domestic academic circle to think over CSR. In the
book CSR, he defined CSR as corporate current responsibilities assumed by companies
to deal with all sorts of social demands and problems and seek development and
living space based on the preservation of international, social and human fundamental
rights and interests in combination with relatively mature stakeholder concepts in
overseas countries.
Zhang, et al. (2012) explained the definition of CSR based on stakeholder theory,
insisting that except as economic responsibilities for shareholders and creditors,
companies should also establish a set of formal or informal rights protection
responsibility mechanisms for employees, cooperative partners, government and
communities, natural environment and other stakeholders (Liu et al., 2017).
China Enterprise Management Annual defines CSR as “the responsibility
necessarily concerned and performed by companies for sake of long-term development,
including coercive legal responsibility and self-conscious moral responsibility”.
Pursuant to relevant documents and reports in China, the development stage of
CSR in China could be generally divided to the following three stages:
Stage I: From the mid-90s to early 21st century, under the efforts of international sellers
and brand owners, the society paid great attention to CSR and established CSR
implementation criteria, standards and systems in international procurement.
Chinese companies started to accept CSR factory audit enforced by trans-
national companies.
30
Stage II: From the early 21st century to 2006, CSR started to obtain wide attention.
Academic institutions and non-government organizations of China and
international organizations in China started to systematically introduce and
extensively study and discuss CSR report system. Government departments also
stressed CSR construction work. For instance, Ministry of Labor and Ministry
of Commerce investigated CSR construction conditions of Chinese companies
and systematically introduced and profoundly observed CSR report system.
Stage III.
The Chinese Government Gradually Guaranteed the Development of CSR in

China at the Level of System
1. Subject to Article 5 of Company Law of the People’s Republic of China,

companies shall abide by laws and regulations, observe social morality and
commercial morality, keep honest and trustworthy, accept supervision from
the government and social public, bear social responsibility, guarantee the
legal protection of corporate legitimate interests free from infringement while
engaging in business operation activities. Article 219 took effect on January
1st 2006;
2. On September 25th 2006, Shenzhen Stock Exchange formally enacted and
executed CSR Instruction for Listed Companies;
3. In January 2008, SASAC issued Guidance for CSR Performance in Central
Companies to urge central companies to reinforce sense of social responsibility
and positively perform social responsibilities;
4. On May 15th 2008, Shanghai Stock Exchange issued Notice on Strengthening
CSR and Issuing Guidance for Environmental Information Disclosure of Listed
Companies to disclose CSR report and environmental protection information;
5. On August 3rd 2009, Shenzhen Stock Exchange price database formally
compiled and issued CSR index and real-time index.
Government and Third-Party Corporates Reinforce the Disclosure and Supervision

Concerning CSR
1. China CSR Compilation Guide Issued by Chinese Academy of Social

Sciences China: CSR Report Compilation Guide (CASS-CSR1.0) issued
in 2009 has been successively upgraded to 3.0 Version for twice. In the past
three years, CSR report practice takes place drastic changes. In response to
new situations and new requirements, for further increasing the applicability
and explanatory ability of the guide and exerting the values of CSR report in
China to a large extent, CASS-CSR4.0 was officially issued on November 8th
31
2017 based on full research and discussion. The positioning of existing CASS-
CSR4.0 has been transformed from a “report compilation guide” to “report
integrated guide” and accordingly, it turns to be a comprehensive guide which
fully integrates report flow, report management and report value management
system. CASS-CSR4.0 advocates CSR report value management for the first
time so that the report could internally reinforce management and externally
boost brand effects. In the future, CASS-CSR 4.0 will continually construct
1 (basic framework) + N (industry-classified guide) + M (topic guide) guide
series and build up an entire system to further promote guide systematicness
and applicability;
2. China CSR Report rating standards issued by Chinese Academy of Social
Sciences: Since 2009, Chinese Academy of Social Sciences would regularly
issue CSR Blue Book per year which systematically studies the CSR development
index of top 100 state-owned companies, top 100 private companies, top 100
foreign-funded companies and 16 key industries in electricity, household
appliance and real estate, aiming to discriminate the stage characteristics
about CSR development in Chinese companies and provide benchmarks for
the promotion of policy formation and relevant studies;
3. Third-party CSR report rating agencies come into being: Run Ling Global
CSR (Ranking CSR Rating, RKS) established since 2009, it has provided
a professional rating for corporate social responsibility reports of Chinese
A-share listed companies every year. It is an authoritative rating agency for
third parties in China. To issue the most just corporate responsibility rating
report for investors, consumers and the social people. Run Ling Global CSR
report rating system actively refers to the latest international authoritative
standards of social responsibility ISO26000, and takes into account the industry
differences of listed companies in China, based on Macrocosm-M, Content-C,
Technique-T, Industry-I four aspects of evaluation. Fifteen first-level indicators
and 63 second-level indicators including strategy, stakeholders, labor and
human rights, and fair operation were set up to evaluate the CSR report. The
scoring system used structured expert scoring method, and the total score is
100 points. Among them, the integral evaluation accounted for 30%; content
type evaluation accounted for 45%; technical evaluation accounted for 15
points; industry evaluation accounted for 15%. The fraction of 0 ~ (100) was
divided into nine grades of AAA, AA, A, BBB, BB, B, CCC, CC, and C.
In general, current situation concerning the performance of CSR in Chinese

companies remains in the start-up stage. In spite of progressive progress and general
low development level, there also exist many prominent CSR cases. According to
the latest 2017 CSR Blue Book on Annual Meeting of Chinese Companies issued by
32
CSR Research Center of Chinese Academy of Social Sciences, CSR development

index of top 300 companies in China totaled 37.4 points in 2017 generally in the
start-up stage, increasing by 2.2 points than that in 2016. Throughout the past nine
years, CSR continues to develop in depth and make improvement in China. In
2009, CSR development index of top 300 companies in China totaled 15.2 points
generally in the “bystander” stage. In 2012, CSR development index increased to
23.1 points, transiting from the “bystander” stage to the “start-up” stage. In 2017,
CSR development index of top 300 companies in China totaled 37.4 points.
In 2017, facing up to the changes in economic and social environment at home
and abroad and the growing focus on companies, CSR development index points
of Chinese companies presented sustained growth tendency and stably picked up.
In spite of the overt differentiation of CSR development index among state-owned
companies, private companies and foreign-funded companies in 2017, state-owned
companies obtained maximum points (58.7 points), successively followed by private
companies (29.7 points) and foreign-funded companies (23.9 points). Additionally,
as for rating, around 44% companies had reached the “bystander” development stage
and first-star level in 2017.
CSR of Chinese Enterprises Under the

Backdrop of the Belt and Road Initiative
The Chinese government places much emphasis on CSR problems in “One Belt and
One Road” construction process. As highlighted by The Vision and Action to Push
Forward the Construction of Silk Road Economic Belt and 21st Maritime Silk Road
(abbreviated for Vision and Action) issued in March 2013, Chinese companies ought
to develop local economy, increase local employment opportunities, elevate local
living standards, perform corporate social responsibility and protect local species
diversity and ecological environment in countries alongside the “One Belt and One
Road”. While financial institutions such as Asian Infrastructure and Investment Bank
(AIIB), Silk Road Foundation, New Development Bank in BRICS further point out
in guideline and investment guide that companies must strictly perform CSR in the
“One Belt and One Road” construction process.
In general, “going global” Chinese enterprises have become, to some extent,
a contributing part of the socio-economic development in host countries.
Internationalization of enterprises by far represents China’s economic integration
into the global economy. In this process, enterprises have come to understand
international market rules and embrace diverse cultures and values. Their support
for well-balanced development of economy, society and the environment in host
countries has honored their commitment to sustainable development, while further
efforts are still desirable. To address these issues, all UN Member States adopted
33
Table 1. Summary of Chinese companies’ achievements and challenges in sustainable

overseas development (corporate governance)
Corporate Governance
Achievements Challenges
The majority of Chinese companies • Companies’ risk prevention practices still fall short
Overseas
have established a relatively of their policies, especially with regard to setting up
Risk
comprehensive overseas risk special risk prevention funds and conducting third-
Management
management framework. party social and environmental impact assessments
• Chinese companies’ knowledge on the specific
An increasing number of international standards and guidelines on sustainable
Chinese companies have come development needs to be enhanced.
to acknowledge the concept • Chinese companies need to be motivated more by
and value of “corporate social such external factors as expectations of their business
responsibilities”, and are gradually partners, stakeholders and local communities.
Overseas turning it into actions. Nearly • The effective connection between CSR management
CSR 90% of them have established or system and their overseas CSR implementation
plan to establish an overseas CSR departments needs to be enhanced.
management system, and most • Overseas CSR reports need to be released at higher
of them have appointed special frequencies.
personnel or designated special • Lack of professionals, financial support and
departments for this work. incentive/punishment system are the major factors
affecting the implementation of CSR initiatives.
Chinese companies attach great
importance to stakeholders who • Chinese companies’ understanding and appreciation
are highly relevant to their core of the role and function of indirect interested parties
Overseas business (including customers, (local communities, trade associations, news media,
Stake- shareholders, local governments, international organizations and NGOs) need to be
holders the Chinese government, and improved.
suppliers), and most companies • The existing mechanism for interacting with stake-
have established a set of approaches holders needs better implementation in practice.
for interacting with stakeholders.
Note: Report on the Sustainable Development of Chinese Enterprises Overseas 2015, p.103
“Transforming our World: the 2030 Agenda for Sustainable Development” (the
2030 Agenda) at the United Nations Sustainable Development Summit held in New
York from 25 to 27 September 2015. As a programmatic document toguide global
sustainable development over the next 15 years, the 2030 Agenda encompasses 17
Sustainable Development Goals and 169 targets to complete what the Millennium
Development Goals did not achieve.
The essence of CSR in Multinational Enterprises could be understood as the
responsibility assumed by companies for the host country in overseas operation,
including local economic development responsibility, environment responsibility
and staff rights and interests protection responsibility, etc.
The “One Belt and One Road” strategy is inseparable from the performance
of CSR in overseas companies. In the “One Belt and One Road” strategy, “policy
communication, road connection, trade smoothness, currency circulation and public
34

overseas development (economic performance)
Economic Performance
Most Chinese companies run
successful business operations
overseas. Most companies believe • Some companies have yet to achieve profitability in
they have a leading or above-average their overseas operations, with 24% of the companies
Overseas innovation and R&D capabilities operating at a loss for the time being.
Business in host countries. The national • Most companies only have limited financing
Operations strategies, policies and planning channels. They mainly work with domestic financial
of host countries are becoming institutions and are not yet adept at working with
important factors that influence overseas financial institutions.
Chinese companies’ overseas
investments.
• In practice, most companies purchase
Most Chinese companies assent to predominantly from China due to various constraints,
Local
the principle of prioritizing local including culture and language differences, excessive
Procurement
procurement. costs, inexperience at managing local procurement,
and quality of host country’s suppliers.
Most companies believe that they
Transfer of • Some companies are not confident about the
have had a positive spillover effect
Technologies effectiveness of such technology and experience
on local companies by helping
and transfers.
local suppliers and sub-contractors
Management • The system for evaluating the sustainability of
improve their technologies and
Experiences suppliers needs improvement.
management.
Most companies believe that
they can run a compliant and
Compliance
fair overseas business. “Business • The exists competition among Chinese companies
and Market
integrity” is named by most overseas.
Competition
companies as one of their core
values for overseas operations.
empathy” (short for “five principles”) incorporate some past cooperative proposals
and existing cooperative mechanisms into the strategy. This decides that under the
“One Belt and One Road” strategy, companies should not merely aim at their own
rights and interests, but also need to form cooperative and win-win relation with the
host country as a community in responsibility, make contributions to the realization
of the five principles and eventually promote the stable implementation of the
“One Belt and One Road” strategy. In addition, it is also necessary for companies
to have favorable communication with local society, public, community and other
stakeholders.
Specifically speaking, when Chinese countries perform social responsibility in
overseas countries, they would create development and employment opportunities
for local residents, improve skills and solve difficulties in daily life by implementing
35

overseas development (environmental protection)
Environmental Protection
Most Chinese companies represent
that they are knowledgeable about the
host country’s environmental laws and • Although most companies have
regulations, that they have conducted third- conducted third party environmental
party environmental impact assessment impact assessment, greater effort is
on overseas projects, and that they have needed for follow-up implementation and
Compliance
adopted certain measures (installing improvement.
pollution control equipment, investing in • Greater transparency regarding
environmentally information on the environmental impact is
friendly products, and conducting required.
regular assessments, etc.) to reduce the
environmental impacts on the host country.
Energy Companies have limited understanding
Most companies have established rules
Consumption, of energy efficiency management and
governing energy efficiency, energy
Emission and emission and wastewater management.
conservation, emission control and
Wastewater • The gathering and analysis of relevant
wastewater discharge.
Discharge information and data need to be improved.
• Industries that have major impacts on
Most companies believe that they have biodiversity conservation should attach
Biodiversity
not negatively impacted the biodiversity more importance to understanding and
Conservation
conservation of host countries. implementing the relevant protective
measures.
localization operation and management, establishing favorable relation with local

community and developing community integrated activities, therefore making local
residents feel respect and favor and effectively conveying government messages to
the public.
Risk of CSR Under the Backdrop of the Belt and Road Initiative
Frequent change of state ruling party and leaders, severe racial and religious conflicts,
unstable domestic political situations and overall investment environment, and
legal risks in some countries alongside “One Belt and One Road” all generate huge
hidden dangers for overseas investment companies. In addition, here list the latest
“One Belt and One Road” national investment security rating results issued by the
Chinese Academy of Social Sciences.
Thus it can be seen that all walks of life in China still have certain doubts about
the investment risks in countries alongside “One Belt and One Road”.
36

overseas development (social performance)
Social Performance
• Cultural differences are the most
Most Chinese companies believe that they prominent issue
have established a relatively comprehensive facing overseas labor relations.
Labor
hiring practice that safeguards equal • Chinese companies should give higher
Relations
employment, occupational health, safe priority to the training and promotion
production, and wage security. of local employees and to raising the
proportion of local managers.
Over half of the companies have conducted
thirdparty social impact assessment.
• Nearly half of the companies have
Community Additionally, they actively seek to establish
not conducted third-party social impact
Issues and harmonious community
assessment.
Overseas relations through strengthening
• Unfamiliarity with local customs, lack of
Social communication with stakeholders, weighing
communication, cultural differences and
Impact community risks when making investment
local residents’ misperception are the main
Assessment decisions, stepping up interactions with local
issues confronting Chinese companies.
residents and increasing investment in public
welfare projects.
Over half of the companies have conducted
thirdparty social impact assessment. • Greater involvement in charity projects is
Community Additionally, they actively seek to establish expected of Chinese companies.
Issues and harmonious community relations through • Major factors hindering Chinese
Overseas strengthening communication with companies’ public welfare programs include
Social stakeholders, weighing community risks lack of influential partners, lack of sustained
Impact when making investment decisions, stepping and systematic public welfare investment,
Assessment up interactions with local residents and and inexperience at interacting with media
increasing investment in public welfare to generate positive publicity.
projects.
• Greater involvement in charity projects is
Chinese companies give back to the local expected of Chinese companies.
Overseas communities mainly through such means as • Major factors hindering Chinese
Public organizing cultural exchanges, participating companies’ public welfare programs include
Welfare in local infrastructure projects, providing lack of influential partners, lack of sustained
Investment vocational training, and running public and systematic public welfare investment,
welfare programs for underprivileged groups and inexperience at interacting with media
to generate positive publicity.
Investment risks confronted by China-invested companies alongside the “One

Belt and One Road” could be grouped to governance risks, economic risks and
cultural risks.
Governance risks are measured by global governance index (WGI). As an index
used to measure governance quality issued by World Bank, WGI is able to reflect
the integrated risk governance conditions of a country. This index could be further
grouped to six indicators including political democracy, political stability and non-riot,
37
Table 5. “One Belt and One Road” national investment security rating (2018)
2018 2018
Country Region Ratings Country Region Ratings
Ranking Ranking
1 Singapore Southeast Asia AA 19 Laos Southeast Asia
2 UAE West Asia A 20 Tajikistan Central Asia BBB
3 Israel West Asia A 21 Uzbekistan Central Asia BBB
Central and
4 Poland A 22 India South Asia BBB
Eastern Europe
Central and Central and
5 Hungary A 23 Greece BBB
Eastern Europe Eastern Europe
Czech Central and
6 A 24 Cambodia Southeast Asia BBB
Republic Eastern Europe
7 Malaysia Southeast Asia A 25 Sri Lanka South Asia BBB
Central and
8 Romania A 26 Vietnam Southeast Asia BBB
Eastern Europe
Central and
9 Bulgaria BBB 27 Myanmar Southeast Asia BBB
Eastern Europe
10 Saudi Arabia West Asia BBB 28 Iran West Asia BBB
11 Kazakhstan Central Asia BBB 29 Bangladesh South Asia BB
12 Philippines Southeast Asia BBB 30 Mongolia East Asia BB
13 Russia CIS BBB 31 Ukraine CIS BB
14 Indonesia Southeast Asia BBB 32 Belarus CIS BB
15 Thailand Southeast Asia BBB 33 Kyrgyzstan Central Asia BB
Central and
16 Turkey BBB 34 Egypt Africa BB
Eastern Europe
17 Turkmenistan Central Asia BBB 35 Iraq West Asia B
18 Pakistan South Asia BBB
government efficiency, regulation quality, legitimacy degree and corruption control.

Higher scores indicate more perfect systems. As proved by the scores of countries
alongside the “One Belt and One Road”, China overseas direct investment does not
have any overt preference for the risk governance in the host country. This suggests
that governance risk might not have drastic influence on the regional decisions of
foreign direct investment. Actually, market size, market potential, degree of opening,
resource endowment and other factors in the host country might be more important.
Economic risks constitute another major concern in overseas direct investment.
The indicator of macroeconomic environment and financial market development
could measure the influence of economic risks on overseas investment in China.
Specifically, macroeconomic environment indicators include government budget
38
balance, gross national deposits, inflation rate, government debt and national credit
rating, while financial market development indicators include financial market
efficiency and reliability. In terms of location choice, Chinese overseas direct
investment relatively prefers countries with more mature macroeconomic environment
and financial market development. Meantime, it also proves that macroeconomic
environment and financial market development of the host country are also two
key factors concerned by China-invested companies in overseas direct investment.
Cultural risks in overseas direct investment could be measured by the indicator of
cultural distance. In general cases, cultural distance refers to the discrepancy between
two countries in norms and values, including language, education and religious belief
etc. Owing to its influence on the information exchange between domestic country
and host country, cultural distance possibly leads to cross-national misunderstanding
in the communication process and forms non-conciliatory contradictions, therefore
adding corporate overseas direct investment costs. Throughout the comparative
analysis on national cultural distance value and national direct investment flow
value in countries alongside the “One Belt and One Road”, Chinese overseas direct
investment is more inclined to choose countries with shorter cultural distance so
as to avoid cultural risks.
On the other hand, it is undeniable that some companies in China indeed ignore the
performance of social responsibilities out of the blind pursuit for economics interests.
In the eyes of overseas consumers and government, these Chinese companies usually
plunder resources, make destructive investment, take over resources, devastate the
environment, produce forged and fake products, and oppress staff. Such unfavorable
impressions pose new challenges to the overseas investment of China and even
force overseas consumers and government to boycott the inflow of foreign capital
and generate “China threat theory”. Indeed, unfavorable impressions such as “The
Marshall Plan” will directly affect the smooth development of “One Belt and One
Road” construction in China (Huang, Zhen & Wang, 2018).
From the perspective of policy and law, CSR performance evaluation standards in
China still do not integrate with the international society. China does not incorporate
internationally acknowledged ISO26000 authentication standards nor formulate
uniform evaluation standards for the performance of CSR. Additionally, with
regard to CSR supervision in overseas companies, relevant legal system remains
to be unsound yet and industry association does not enact or implement designated
normative documents yet.
Besides, high-standard CSR norms have become the barrier in cross-national
corporate operation. Cross-national companies in developed countries have gone
through long-term CSR practice and cultivate favorable brand effects and long-
term competitive advantages, while in contrast, the social practice of cross-national
39
companies in developing countries remains in the start-up stage which lacks intense
sense of social responsibility like peers in developed countries. In international
investment competition, developed countries advocate the establishment of social
responsibility standards. The “walk-out” companies in developing countries lack
speech right in international responsibility system, which places cross-national
companies in developing countries at a relatively disadvantageous status and impairs
corporate international competitiveness to some degree. When Chinese companies
go abroad or march to developed countries, Chinese companies are usually restricted
by high-standard CSR norms and encounter barriers in cross-national business
operation. Once there arise any discrepancy in investment environment, environment
legislation, and social culture, these problems might be amplified by international
media and define Chinese companies as irresponsible companies (Zhang, 2016).
CSR Strategies in “One Belt and One Road” Countries
This research considers that CSR risk policy in “One Belt and One Road” countries
could start with the perspective of Chinese government and company as follows:
1. Chinese Government:
a. It is very essential to formulate corresponding overseas investment
laws. Apart from relevant policies and opinions enacted by government
departments, there still lack any formal laws and regulations concerning
overseas investment. Combining with existing regulations and legal
documents, Chinese overseas investment takes incentive and management
measures, such as simplifying approval procedures, and converting
general outbound project approval system to filling system. However,
as indicated by overseas investment protection measures, there still have
obvious shortcomings and sluggish legislation phenomenon in system
design. Therefore, the government should speed up Chinese overseas
investment legislation, offer reference to Chinese overseas investment
companies and reduce risks in corporate investment;
b. The government could expand the protection scope of international
investment by signing bilateral and muti-lateral investment protection
protocol; or reduce potential loss by improving overseas investment
insurance system and providing thorough risk aversion measures for
companies;
c. The government should accelerate the construction of CSR authentication
institution in China, establish CSR supervision and evaluation system
and hint mechanism for companies with low rating scores, and lower
40
Table 6. 2005-2016 distribution of overseas investment risk cases in Chinese

companies alongside “One Belt and One Road”
Country Case Loss Amount /US $100 Million Sum Ratio/%

Iran 4 252 44.6
Philippines 5 64.4 11.4
Myanmar 2 39.1 2.1
Syria 2 37.7 6.7
Afghanistan 1 28.7 5.1
Vietnam 3 26.8 2.6
Russia 1 25 2.3
India 1 15 2.7
Kazakhstan 1 13.9 1.8
Mongolia 2 12.4 2.2
Indonesia 2 7.3 0.8
Saudi Arabia 1 6.2 1.1
Poland 1 4.5 0.8
East Timor 1 3.5 0.6
Pakistan 2 8.7 1.2
Thailand 1 3 0.5
Bulgaria 1 1.9 0.3
Cambodia, 1 1.9 0.3
Uzbekistan 1 1.1 0.2
Data source: Chinese investment dataset - China Global Investment Tracker (2016. 7)
overseas investment entrance threshold for companies with high rating

scores. Moreover, it connects CSR performance with other corporate
indicators by gradually incorporating CSR performance into overseas
investment companies;
d. Chinese government needs to boost overseas investment information
service level, and provide information service for risk management in
Chinese-invested companies, such as building up an entire “One Belt
and One Road” database with basic state information such as economics,
politics and culture and timely upgrading database information;
e. Government or relevant departments should positively organize all sorts
of exhibitions or international conferences, promote the communication
between Chinese-invested companies and surrounding countries, constitute
a favorable communication platform with the host country and allow
41
Chinese-invested companies to make appropriate investment decisions.

Furthermore, they also need to organize companies to make field visit
in surrounding countries so as to learn about local customs and increase
cultural exchange;
f. The government should carry out “One Belt and One Road country/
district NGO white list work”, add officially recognized public welfare
organizations in surrounding countries to the catalogue and offer effective
cooperative support to the performance of corporate social responsibility
and the implementation of public welfare investment strategies;
g. The government should construct and standardize industry association,
exert the bridging role of industry association between companies and
government departments, convey the latest state legal policies and
information to companies and meantime help companies formulate CSR
plans;
h. The government should carry out public diplomacy, create a favorable
international environment for corporate direct investment. The Chinese
government is supposed to deepen the understanding and identity of
countries alongside “One Belt and One Road” about China and provide
a loose investment environment and political environment for domestic
companies.
2. Chinese Company:
a. Companies should give full evaluation and consideration to the politics,
economics and cultural background of target countries of investment
projects and try to adjust policies to local conditions. Meanwhile, pertinent
risk prevention and emergency plans should be released to reduce the
blindness of overseas investment. With focus on compliance review, it
is also necessary to make risk evaluation;
b. Companies should reinforce localization operation, weaken the localization
colors, and execute localization strategy in personnel, capital, product
sources, technical development and human resource development.
Additionally, attention should be paid to staff legal rights and interests
and harmonious labor-capital relationship;
c. As for corporate scale, major companies (especially central companies)
ought to take lead to set up examples, invite the participation of small and
medium-sized companies, encourage more Chinese-invested companies
to perform CSR by learning from major companies’ practices;
d. Furthermore, companies are requested to familiarize with the language,
culture, law and talent training in host countries;
42
e. Even if the investment environment is relatively stable, companies had

better make preparations for risk aversion;
f. Companies need to focus on the relation with local community. Foreign
investment companies should not simply care about the communication
with local government, but ignore the communication with other
stakeholders, especially surrounding community. In particular, these
companies can never violate business ethics and make contact with local
government by bribery and other improper means against the pursuits of
other numerous stakeholders;
g. Sustainable development strategy should not be illustrated as corporate
long-term development objective. CSR never appears alone in single
and short-term project, but habitually connects with philanthropy and
donation. In this way, such public-welfare donation lacks sustainability.
The feasible way is to target at corporate sustainable development and
overall development of economics, environment and social responsibility,
and win-win objective with the host country;
h. Companies need to boost corporate publicity and establish rational
information communication mechanism. In addition to the communication
and exchange with local government, companies have to make contact with
local social groups and create a favorable public opinion environment;
i. Companies should positively construct CSR strategy, incorporate CSR
into corporate strategic management system, reinforce corporate cultural
construction and improve corporate integrated management strategy.
Table 7.
Institute of Economics in Zhejiang University has accumulated rich experience in student training of
“One Belt and One Road” countries, including students of master’s or doctor’s degree who have obtained
government scholarship and self-supporting students in surrounding countries. Likewise, International
Education Institute of Tianjin University of Finance and Economics recruits students of bachelor, master
and doctor’s degree in finance and economics major from 33 countries alongside “One Belt and One Road”
including Uzbekistan, Kazakhstan, Russia, Britain, Hungary, Thailand, Mongolia, South Korea, Congo,
popularizes Chinese International Education and promotes Chinese culture.
China Export & Credit Insurance Corporation releases insurance products for the investment projects in
“One Belt and One Road” countries. Investors may partially transfer political risks to insurers by buying
corresponding overseas investment insurance and accordingly avoid the influence of political risks. Beyond
that, partial risks could be transferred to local partners by joint venture with local capital and equity financing
in host countries.
43
The Mainstay of CSR-State-Owned Enterprises Under

the Backdrop of the Belt and Road Initiative
In recent years, along with the advancement of “One Belt and One Road” strategy,
Chinese overseas investment size continually expands and more and more Chinese
companies go out. In this process, central companies become the major force of
“One Belt and One Road” construction. According to the news press concerning
“One Belt and One Road” construction presided by central companies on May 8th
2017, State-ouned Assets Supervision and Aministration Commission of the State
Council disclosed that for past three years, altogether 47 central companies in China
made share investment or cooperated with companies in countries and districts
alongside “One Belt and One Road” in 1576 projects. Overseas project operation in
state-owned companies also keeps constant development and iteration, which well
corresponds to the substantial improvement of technical and management abilities
of these state-owned companies. These companies greatly make improvement in
project technical level and capital intensity. Besides high speed rail, China General
Nuclear Power Group (CGN) and other nuclear power construction companies
also adopt “Hualong One” self-independent innovation technology to build up the
new-generation nuclear power plants in Europe and Britain and similarly, China
Communications Construction and other capital construction companies rely on
large equipment such as cutter suction dredger.
From the perspective of the property of companies alongside “One Belt and One
Road”, state-owned companies (especially central companies), possess prominent
advantages in size and capital, while most private companies are still small and
medium-sized companies with limited size and capital. These companies even
confront problems in survival and existence, let alone the performance of CSR.
Now that central companies undertake national image and economic burdens, the
performance of CSR inevitably affects national image and especially the query about
“China threat theory” in recent years. Therefore, when it comes to the discussion
about social responsibility alongside “One Belt and One Road”, performance of
social responsibility in state-owned companies, especially central companies,
becomes an inevitable topic.
As instructed by the latest 2018 Central Company CSR Blue Book, central
companies should assume the post as the bellwether in the implementation of “One
Belt and One Road” initiative and the participation of international operation. In
particular, central companies undertake considerable water, electricity, and oil
shipping infrastructure construction and supply projects in countries alongside “One
Belt and One Road” in Africa and Southeast Asia, and make great contributions to
resource energy development and heavy chemical industry construction in nearby
countries and regions. Additionally, based on CSR management questionnaire survey
44
for 72 central companies, this report points out that on the one hand, central companies
generally have overseas CSR performance awareness in overseas operation, behave
positively in information disclosure, democratic management, staff vocational health
management, environmental protection, sincere operation, and social integration,
construct relatively mature systems and achieve outstanding performance results. In
the meantime, in the process of CSR performance, central companies also confront
restrictions in professional organizations, talent service, theoretical and support
practice. Unpredictable political status, remarked cultural discrepancy between
China and foreign countries, insufficient communication with local community and
resulting local residents’ misunderstanding about Chinese companies pose great
threats to CSR performance of central companies in overseas operation.
The report comes up with two suggestions. First of all, State Asset Regulatory
Commission should instruct the overseas CSR performance of central companies,
actively conduct special improvement work, formulate overseas CSR performance
appraisal mechanism, set up overseas performance appraisal and reward-punishment
mechanism, urge central companies to enhance overseas performance information
disclosure flow and guide the training of professional social responsibility talents.
On the part of local social groups, what they should do is to positively go abroad,
give full play to professional advantage and speciality, and make use of international
resources to help central companies improve the practice values of overseas CSR
performance activities. It is the responsibility for domestic mainstream media to give
voice on behalf of central companies and establish responsible corporate image and
state image by virtue of their global influences, pluralistic means of promotion and
cooperation with mainstream media in host countries. Secondly, companies should
improve overseas CSR performance management mechanism, including overseas
CSR management system and management department and talent team construction,
and simultaneously reinforce overseas CSR performance information disclosure and
promotion, fabricate overseas responsible brands, consummate responsibility practice
pattern, positively join in international responsibility exchange and formulation of
relevant international standards, and refer to outstanding corporate CSR experience
in host countries so as to elevate overseas CSR performance practice proficiency
and establish sincere brand image.
Under the background of “One Belt and One Road”, central companies successively
turn to be the bellwether in the implementation of Chinese “go-out” strategy. CSR
of overseas companies alongside “One Belt and One Road” also becomes a key task
on the agenda of central companies in recent years. Besides relevant reports and
news which frequently introduce CSR in “One Belt and One Road” implementation
process, corporate CSR reports also divert attention to the topic in relation to “One
Belt and One Road”.
45
Since CSR report gives response to stakeholders’ requests on corporate economic,

environmental and social information as a significant communication platform
between the company and stakeholders, substantial words about “One Belt and One
Road” in the report even more highlight corporate focus on CSR strategy under the
background of “One Belt and One Road”.
According to the latest 2016-2017 Annual CSR Report, most central companies
have mentioned “One Belt and One Road”-related overseas CSR contents (such as
“One Belt and One Road”-related CSR topic) in their CSR reports and some central
companies even start to enact professional overseas investment country-themed
CSR reports. China Communications Construction even issued a CSR report in
relation to “One Belt and One Road” topic in 2018. This suggests that many central
companies actually have listed CSR strategy under the background of “One Belt
and One Road” as a component of corporate organization strategy.
In “One Belt and One Road” construction process, numerous central companies
have offered manpower, material and fund guarantee to CSR and achieved outstanding
overseas CSR performance. For instance, in the development construction and
operation management process of Laos-Nanou River Project, POWERCHINA
adheres to the mutual benefit and win-win concept, firmly integrates into local area
and builds up community of interests and development community. By carrying
out “governance localization”, “operation localization”, “resource localization”,
“development localization”, “responsibility localization” and “culture localization”,
and constructing the “six-in-one” localization management system, POWERCHINA
propels in-depth overseas CSR performance and lays a firm development environment
for the healthy operation of projects. China State Construction Group Co., Ltd boosts
the overseas influences of Chinese culture with Chinese architecture, provides
reference for other investment construction companies in respect of cultural soft
power and internationalization operation, as well as offers experience to other
companies in humanistic exchange and communication between government and
the public. State Development and Investment Corporation has achieved great
performance in sustainable development topics such as poverty elimination, social
justice and environmental protection while propelling its international operation,
which could be proved by the deepening of international friendship and lifting of
corporate brand reputation and influence.
Case Study: First “One Belt and One Road” CSR

Report- China Communications Construction
Although some central companies have released overseas country CSR reports, or
mentioned some topics in relation to “One Belt and One Road” in integrated CSR
reports, China Communications Construction published “One Belt and One Road”
46
CSR Report in Beijing in May 2018. It was the first “One Belt and One Road” CSR
report formally released by Chinese companies.
With integrated businesses covering infrastructure investment and financing,
consulting and planning, construction design and management operation nationwide,
China Communications Construction now ranks in the 103th place in Global 500.
As the third largest international contractor, China Communications Construction
joined in “One Belt and One Road” construction and signed new contracts worth
of $ 17 billion with countries alongside “One Belt and One Road” in 2017 on the
top of Chinese-invested company list. Since its report fails to mention referential
compilation guide, the thesis takes content analysis method commonly used in CSR
report analysis to expound economic-environmental-social responsibility.
Economy
Most parts of the report involve the performance of economic responsibility, which
indirectly manifests the stages and characteristics about central companies’ overseas
CSR performance. Please refer to the following sections for more details (Summary
about infrastructure).
Built major infrastructures in countries alongside “One Belt and One Road”,
including 152 bridges, 10320-kilometer road, 95 deep-water berths, 10 airports, 754
container cranes, and 2980-kilometer railway; made investment in China-Pakistan
Economic Corridor, Mongolian Railway and other projects; new contract amount
concerning “One Belt and One Road” totaled $ 16.643 billion in 2017.
Infrastructure connection primarily propelled the construction in four key
businesses including “Love Bridge”, “Fortune Road”, “Development Harbour” and
“Happiness Town”.
Table 8.
1. Love Bridge: To draw close the distance between local area and China by crossing estrangement and
natural chasm by bridge construction
2. Fortune Road: To enrich local residents by investing in road and railway construction
3. Development Harbour: To construct portal in host countries and connect with the world to encourage
joint development by investment in seaport and airport.
4. Happiness Town: To improve general living and development standards by investing to build a group
of new industrial parks. (Opening to the outside world with the “special zone and experiment pilot”
development mode is the precious experience throughout the development of China. It also provides
Chinese urbanization plans for relevant countries and regions alongside “One Belt and One Road”.
China Communications Construction has over 20 outbound industrial park projects under construction in
surrounding countries. Some established projects have created employment opportunities for local residents
and driven the growth of local economy.)
47
Environment
Established HSE management system and completely executed green construction

standard management; researched and developed green technology and craft, and
maximally preserved resources and cut down negative influences on environment.
All international engineering projects undertaken by central companies had passed
environmental protection acceptance inspection for fear of major environmental
accidents.
Society
1. To be the excellent talent training base in host countries;

2. Cultural integration: to promote cross-cultural management and cultural
integration regulations and management systems, respect and learn cultural
differences and reinforce overseas employees’ cultural identity and sense of
belonging;
3. Localization management: to employee plenty of local staff, and go through
“teacher-apprentice” system which designated masterly and skillful Chinese
staff to teach one or two foreign workers or sent local talents to study in China
by scholarship incentive;
4. Emergency rescue team in host countries;
5. Community construction and relevant voluntary activities (such as Montenegro,
Mongolia and other companies or projects); and student loan relief (Kibaale
and other areas).
Others
1. Quality engineering compliance engineering quality industry promotion;

2. Security product: to pass overseas engineering security production performance
appraisal.
Furthermore, one prominent feature of the report is that it fully sets forth the
communication with corporate stakeholders, including local government and internal
corporate staff. Exactly, contents concerning local government have received the
praise and letter of thanks from the President. More importantly, the report also
gives voice for staff. A typical example is its focus on ten foreign young staff.
Obviously, as of the proposal of “One Belt and One Road” initiative, China
Communications Construction has formed distinctive “smiling-face mode”.
After clarifying overseas development priority strategy, China Communications
48
Construction positively and comprehensively advances construction in “Love Bridge”,

“Fortune Road”, “Development Harbour” and “Happiness Town” in response to state
initiative, focuses on key channels, key cities and key projects, undertakes a large
group of transportation projects consisting of Kenya-Mongolia Railway, Sudan Port,
and Sri Lanka Colombo City to build up a composite infrastructure network. China
Communications Construction “One Belt and One Road” CSR Report published
this time systematically summarizes that since the proposal of “One Belt and One
Road” initiative, brilliant responsibility practices and outcomes attained by China
Communications Construction in building global quality engineering projects,
guaranteeing stakeholder rights and interests, encouraging staff growth, seeking
win-win situation with partners, fabricating community harmony, and pursuing
environmental sustainability potently prove the important contributions made by
Chinese companies in the construction of “One Belt and One Road” and human
destiny community.
However, CSR report does not clarify its referential compilation standards and
it is merely published in Chinese. More seriously, either in length or contents,
most parts of CSR report talk about CSR economic responsibility (which could
be proved by infrastructure construction, growth of local economy and promotion
of employment) and partially involve environmental and social benefits. Whereas,
relevant compilation standards have not been explained and interpreted in detail.
Anyhow, it is a beneficial attempt made by China Communications Construction
to join in “One Belt and One Road” construction and release the first CSR report
among Chinese companies under the background of “One Belt and One Road”. To
be sure, it also generates positive impacts on the “One Belt and One Road” CSR
decisions for other central companies. Furthermore, it is predicted that more and
more companies will release “One Belt and One Road” CSR reports in the future and
make for the systematic construction of “One Belt and One Road” CSR management
mode, thus pushing forward the further development of “One Belt and One Road”
construction on the whole.
CONCLUSION
Up to now, CSR topic has become an inevitable topic among Chinese companies. In
spite of the great progress made by CSR, an indisputable fact is that CSR in Chinese
companies is still in a relatively low level. In view of unsuccessful CSR performance
in China, overseas CSR performance naturally confronts more difficulties and
setbacks. Frequent change of ruling party and leaders, severe racial and religious
conflicts, unstable domestic political situations and overall investment environment,
49
and legal risks in some countries alongside “One Belt and One Road” all produce
risks for overseas investment companies and worsen CSR performance. However,
now that CSR performance involves national image and corporate image, humanistic
concerns and other problems, it has great significance to the weakening of negative
images about Chinese companies such as “China threat theory” and “resource plunder
theory”. Along with the acceleration of “One Belt and One Road” CSR progress,
more Chinese companies will go abroad. While in this process, it is state-owned
companies (especially central companies) that play the role of bellwether. With
relatively high overseas investment proportion and strong strength, these companies
possess adequate CSR performance capacity and conditions. While among these
companies, some of them have achieved brilliant performance in “One Belt and
One Road” construction and well practise CSR in overseas operation. Furthermore,
Chinese Company Overseas CSR Report in 2015, first-session “One Belt and One
Road” overseas CSR management combat dialogue in 2016, Central Company
Overseas CSR Report in 2018 issued by Chinese Academy of Social Sciences and
“One Belt and One Road” CSR Report in 2018 issued by China Communications
Construction all prove that both the government and companies have progressively
realized the importance of CSR performance in overseas operation, in particular
CSR performance of companies in countries alongside “One Belt and One Road”.
A conclusion can be hereby drawn that more companies will release “One Belt and
One Road” CSR report and reinforce CSR performance in overseas operation and
the government will continually improve and formulate CSR-related systems and
policies and supervise CSR performance to ensure the further development of “One
Belt and One Road” strategy. Apart from large companies in China, the government
and international environment will raise higher requirements on overseas CSR
performance in small and medium-sized companies.
50
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51
52
Chapter 3
The “Outgoing Strategy”
of Chinese Companies
Ping Zhou
City University of Macau, China
Tim Wong
ABSTRACT
The globalization of economics and China’s accession to the World Trade Organization
(WTO) have brought new opportunities and challenges to Chinese enterprises. Taking
the sense of globalization, China is participating in global resource allocation,
expanding and utilizing the market on the global scale, actively participating in
international division and cooperation, and implementing international operation
are important steps for Chinese enterprises to go abroad and seize the initiative in
the global economic competition. In China, the strategy of “going out” is still at the
initial stage. Compared with the developed countries, there is still a large gap between
China and other developed countries in terms of investment amount, enterprise scale,
and internationalization. China enterprises can adapt to the changing environment
of international market; the key is to improve the competitiveness of enterprises in
the international market, which is a crucial step in expanding Chinese enterprises’
international market.
INTRODUCTION
Since the reform and opening up in 1978, Chinese enterprise competitiveness has
been greatly improved, even though constrained by the system, business philosophy,
management system, management method, management mode and business goals
DOI: 10.4018/978-1-5225-8440-7.ch003
The “Outgoing Strategy” of Chinese Companies
compared to the developed countries. If Chinese enterprises want to continue to be

matured in the international market, they should directly encounter the challenges
above mentioned to decrease the gaps.
THE CHALLENGE TO THE COMPETITIVENESS OF CHINESE

ENTERPRISES BY THE DEEPENING DEVELOPMENT
TREND OF INTERNATIONAL LABOR DIVISION OF LABOR
In the 21th century, economic globalization, distribution of information and economic

networking has become an irreversible trend in the multi-national company’s
development (Duanmu, 2012). The international division of labor has broken the
individual country as the main body of the division of labor and turned the national
characteristics of the traditional division of the relationship to globalization as the
characteristics of multinational enterprises and enterprises between the division of
labor, among which has changed in the past the kind of single product manufacturing
as the boundary division of labor. Countries and multi-national enterprises paid
more attention to the product design, development, research management service
and a series of related value-added activities in the value chain thus multinational
companies as the main body of the company represented the division of labor. The
division of labor of the value chain is more inclined to the outsourcing division of
business between the co-ops of the global multinational corporation (Wang et al.,
2018). Multinational corporations have become the leading factor in deepening the
international division of labor. Multinational corporations have established global
production networks through direct investment, so that industries, especially modern
manufacturing, have globalized characteristics. Facing the international market
competition, Chinese enterprises corresponding to the world economy should face
more competition in the international market, and strive for more effective resources.
They must go to the most effective area of resource allocation to achieve cross
border flow of products, technology, finance and human resources (Liu et al., 2018).
Though the output of many manufacturing products has become the number one in
the world, the credibility and influence of Chinese enterprises and their brands in
the international market are still very small. Chinese enterprises are still passively
accepting the industrial transfer of MNCs, and there are no products, technologies and
brands that have been developed independently. The international competitiveness of
China enterprises is still too disadvantage to dominate the extension of the production
of processors the global rules of transnational corporation, which demonstrated that
Chinese enterprises are only a world processing plant in the international division
of labor system (Lall & Albaladejo, 2004).
53
THE COMPETITIVENESS OF CHINESE ENTERPRISES

IN INTERNATIONAL INVESTMENT
The founder of the theory of international investment, the well-known British scholar
John Dunning researched and divided a certain nation’s investment cycle, namely,
when an economy entity was in the initial stage of development, the investment is
mainly to attract foreign investment; economic development is in a stable stage,
investment activities into two-way choice; economic development to a higher level,
or into the stage of development of foreign direct investment than foreign capital
(Dunning, 2009). Many experts believed that China has entered the stage of two-
way option from the stage of attracting foreign capital. Looking at the history of
the development of the world economy, the economic development of a country,
can not simply rely on foreign capital investment, and should establish two-way
circulation mechanism for actively absorbing foreign capital, but also let the surplus
of domestic capital, the ability to go abroad so that domestic enterprises for resources
allocation of global market. Over the three decades of reform and opening up, China
absorbed a large number of international capital, the introduction of management
experience, advanced technology and equipment, domestic production factors and
external factors of production and management factors, optimization and integration
of organic collection, product structure, enterprises have been adjusted, technical
level, market competition ability and marketing levels increase, improve the China
competitive advantage, which laid the foundation for the Chinese enterprises abroad.
Some advanced and matured Chinese enterprises have taken the initiative to move
towards the international market and transfer oversea production capacity. It is the
initiative to go to the world, or to go to the market passively, and to participate in
the international market competition and global economic activities with a higher
degree of marketization, to gain greater profits, which is an important test for the
competitiveness of Chinese enterprises.
THE CHALLENGE OF THE INTERNATIONALIZATION OF

ENTERPRISES TO THE DECENTRALIZED INDIVIDUAL
BUSINESS MODEL OF CHINESE ENTERPRISES
The evolution of western scholars from different angles of enterprise

internationalization, the Nordic school scholar Johanson, the Swedish scholar Forsgren,
American professor Cavusgil believed that the enterprise internationalization was
a gradual process (Björkman & Forsgren, 2000; Cavusgil & Knight, 2015). The
internationalization of enterprises experienced the development process of the
54
local market and the competition in the international market. From the product
internationalization to the sales internationalization and the brand internationalization,
it will finally come out of the country, become a multinational enterprise, and
occupy a place in the international market. Whether the transnational operation can
be realized is an important sign of the success of the enterprise internationalization.
The principle of gradual development, on the basis of introduction, China
realized the introverted internationalization with transnational enterprises. With the
enhancement of the strength of the enterprise, the enterprise goes to the international
market. The scale of investment of Chinese enterprises going out is still small and
medium sized, which mainly takes advantage of labor intensive advantages, and
occupied the international market with the products of low cost advantage of single
enterprise as well as no advantage of technology intensive and capital intensive.
When economic development is based on collaborative commerce, collaborative
competition and win-win principal, Chinese enterprises still develop in a difficult
and an exploring journey to form the competition, which is no longer suitable for
changing situations. Some people attribute China’s overseas investment to six
features: “single”, “small”, “scattered”, “soft”, “poor” and “flee” (Deng, 2004).
Chinese enterprises in overseas investment amount and many belong to different
administrative level, the administrative system constraints, these enterprises lack
of coordination of the organization, not in the business cooperation and exchange,
cannot achieve the capital, technology and market information, the coexistence and
complementation, but difficult to achieve diversification, fight the enemy separately,
strategic alliances the formation of transnational corporations through transnational
mergers and acquisitions, which demonstrated that the internationalization of
Chinese enterprises was still in the initial stage; on the other hand the downstream
manufacturers internationalization of enterprises were still multinational companies in
the industry chain and the companies were at a low level position in the international
division of labor system with the lack of international competitiveness enterprise
anti risk ability is weak, the lack of international competitiveness.
From David Ricardo’s “comparative advantage” of free trade theory to Robert’s
theory of production factor, the exchange of world trade determines the transformation
of resource utilization and cost accounting in the world from the emphasis on the
use of domestic resources to the world, and the rapid flow of production like water
to the lowest production conditions and the lowest production cost (Maneschi, 2004;
Ruffin, 2002). Robert said: capital always has a certain liquidity, but in the past
it mainly flows in developed countries. The emergence of new political stability
in India and China prompted capital flows to start jumping out of the borders of
developed countries. Although the international business of our overseas enterprises
has developed initially, there is a clear gap between the developed countries and the
55
emerging industrial countries, with the characteristics of the developing countries,

namely, the small investment scale, the single product production and the investment
enterprises in the form of joint ventures. In order to encourage Chinese enterprises
to actively expand the international market and enhance the competitiveness of
enterprises, we must have scientific theoretical guidance and the support and guidance
of national macro policies.
The Chinese government should strive to create a “going global” environment
and encourage and guide our enterprises to go out.
First, the government should guide enterprises to establish the consciousness
and concept of “going out”, and let Chinese enterprises eliminate the idea that the
Chinese domestic market is enough and no need to expand to the overseas market.
Secondly, the government should do a good job for all the services prepared for the
enterprise “going out”, and formulate policies to encourage enterprises to “go out”,
such as to improve the foreign exchange management, increase the transparency
of examination and approval, change the pre-management of some approvals into
registration and filing management. Again, the government should improve the service
level, actively promote the cooperation with the international, and sign bilateral or
multilateral investment agreements with the relevant countries in order to safeguard
the legitimate rights and interests of Chinese enterprises to invest abroad.
It is impossible for Chinese enterprises to have global resources allocation and
strategic thinking for international management without global strategic thinking,
and there can be no action to “go out” to allocate resources. Enterprises should be
good at the global perspective, participate in the allocation of international resources,
establish a set of scientific strategic management system and management strategy for
transnational management, open up the international market actively, and establish
their own international market customer network and sales channels. The competition
of enterprises in the international market is mainly based on comparative advantage
and competitive advantage, so as to cultivate the core competitiveness of enterprises.
The investment plants in the host country pay attention to making full use of local
resources, technology and services to realize the localization of overseas enterprises,
learn to cooperate with overseas enterprises, make up for their strengths and improve
their ability. The enterprise of “going out” needs to develop its own core technology
as soon as possible through research and development sections to develop its own
products, launch its own brand, and set up a good image of the enterprise.
56
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Asian manufactured exports? World Development, 32(9), 1441–1466. doi:10.1016/j.
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PMID:29301304
Maneschi, A. (2004). The true meaning of David Ricardo’s four magic numbers.
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Ruffin, R. (2002). David Ricardo’s discovery of comparative advantage. History of
Political Economy, 34(4), 727–748. doi:10.1215/00182702-34-4-727
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NAFTA. Sustainability, 10(10), 3436. doi:10.3390u10103436
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58
Chapter 4
The Study of Intellectual
Property Protection System:
Under the Context of “One
Belt One Road”
Ping Zhou
Dongjuan Lv
Ying Chen
University of Malaya, Malaysia
ABSTRACT
The “One Belt One Road” strategy is the abbreviation of “Silk Road Economic
Belt” and “21st Century Maritime Silk Road.” In September and October of 2013,
Chinese President Xi Jinping proposed to build the cooperation initiative of “New
Silk Road Economic Belt” and “The 21st Century Maritime Silk Road.” President
Xi Jinping projected to establish the “21st Century Maritime Silk Road” during
his visit in Indonesia in October 2013. Finally, the National Development and
Reform Commission, the Ministry of Foreign Affairs, and the Ministry of Commerce
cooperatively issued the “Vision and Action for Promoting the Construction of the
Silk Road Economic Belt and the 21st Century Maritime Silk Road” on March
28, 2015. The “One Belt One Road” countries were key areas of cooperation in
the context of China’s policy in communication, road connectivity, smooth trade,
currency circulation, people’s mutual understanding, strategic coordination to
strengthen bilateral and multilateral teamwork, and corresponding development.
DOI: 10.4018/978-1-5225-8440-7.ch004
The Study of Intellectual Property Protection System
INTRODUCTION
The Proposal of the “One Belt One

Road” Strategy and its Impact
The “One belt one road” strategy is the abbreviation of “Silk Road Economic Belt”
and “21st Century Maritime Silk Road”. In September and October of 2013, Chinese
President Xi Jinping proposed to build the cooperation initiative of “New Silk Road
Economic Belt” and “The 21st Century Maritime Silk Road”. In September of the
same year, Chinese President Xi Jinping delivered an important speech entitled
“Promoting People’s Friendship and Creating a Better Future” during his visit in
Kazakhstan and proposed to build the “Silk Road Economic Belt” Jointly. President
Xi Jinping projected to establish the “21st Century Maritime Silk Road” during his
visit in Indonesia in October 2013. Finally, the National Development and Reform
Commission, the Ministry of Foreign Affairs, and the Ministry of Commerce
cooperatively issued the “Vision and Action for Promoting the Construction of the
Silk Road Economic Belt and the 21st Century Maritime Silk Road.” on March
28, 2015 (The National Development and Reform Commission, the Ministry
of Foreign Affairs, and the Ministry of Commerce, 2018). The “One belt one
road” countries were key areas of cooperation in the context of China’s policy in
communication, road connectivity, smooth trade, currency circulation, and people’s
mutual understanding, strategic coordination to strengthen bilateral and multilateral
teamwork and corresponding development.
“One belt one road” strategy has a significant impact on the global economics.
Firstly, the goal of the “One belt one road” is to establish a mutually beneficial
interest, destiny and responsibility community covering through Eurasia countries.
Secondly, “One belt one road” is the world’s most promising, all-around, multi-
level economic cooperation strategy, it originated in China, including Central Asia,
Southeast Asia, South Asia, West Asia and parts of Europe. The east is connected
to the Asia-Pacific economic circle. The west is closely related to the European
economic circle. It covers about 4.4 billion people and has an economic aggregate of
about 21 trillion dollars, which accounted for 63% and 29% of the world respectively
(Gong, Tian & wang, 2018). Finally, the “One belt one road” strategy has created a
new regional cooperation model, at the meantime, continuing to deepen cooperation
with developed countries will strengthen cooperation with developing countries
significantly by emerging powers and enhance the status of China (Luo, 2018).
59
THE MAIN PROBLEMS OF IMPLEMENTING IPRS STRATEGY

IN THE CONTEXT OF “ONE BELT ONE ROAD”
The Necessity of Implementing the IPRs Strategy
In the context of the “One belt one road”, establishing and perfecting the national
IPRs strategy and continuously strengthening bilateral and multilateral intellectual
property strategic cooperation is the ambition and necessity of the IPRs strategy to
keep pace with the times.
Implementing an IPRs Strategy is the Need to

Safeguard the Company’s Own Interests
At this stage, the footprint of Chinese companies’ overseas business is spread

across all continents, and with the increasing exchanges and cooperation between
domestic and foreign companies, how can we reduce intellectual property risks on
the basis of maintaining cooperation? IPRs in the new era is a tough issue. Also, it
is a problem that enterprises must seriously consider and treat in order to protect
their legitimate interests.
On December 6, 2017, “World Intellectual Property Index 2017” reported by the
World Intellectual Property Organization in Geneva give the information that, in 2016,
the number of Chinese applications for patents, trademarks and industrial designs
in the world reached a new high, and proportion is the highest in the world. China’s
IPRs both in quantity and quality, are rising, and are gradually moving forward as
intellectual property superpower. A big amount of Chinese enterprises have gone
abroad in the context of the “One belt one road” strategy, however, most of the
“One belt one road” regions are developing countries, and economic development
is uneven, infringement of IPRs has occurred occasionally. For example, the “Flying
Pigeon” bicycle trademark was pre-registered in Indonesia, a large scale of Chinese
trademarks was squatted by foreign companies which caused the Chinese companies
lost their autonomy in trademark management during the overseas investment
process (Zhang, Gao & Cao, 2015). Implementing an intellectual property strategy
can reduce the phenomenon of infringement of IPRs and is an important guarantee
for safeguarding the legitimate rights and interests of enterprises.
60
The Implementation of Intellectual Property Strategy

is in Line With the Needs of the Intellectual Property
Legal Environment in the International Market
In this era, with the continuous development of economic globalization and the
development of the knowledge economy, IPRs have increasingly become the
core resource of national development’s strategic resources and international
competitiveness, and have become an important support for building an innovative
country and mastering the initiative of development (Wu & Lock, 2013). The
intellectual property legal regulation and institutional environment of the international
market is constantly developing and improving and put forward higher requirements
for the development of intellectual property in various countries and regions, not
only to promote the development level of domestic IPRs but also to strengthen
international knowledge. The level of development of property rights promotes the
development of intellectual property in the world. Therefore, the implementation
of the intellectual property strategy is in line with the trend in the world, and
further strengthens the requirements for the exchange and cooperation of IPRs in
the international market. It is also the requirement of the international intellectual
property legal system and environment.
Major Problems in Implementing the IPRs

Strategy for Overseas Investment
In the context of “One belt one road”, the implementation of overseas investment
IPRs strategy has great prospects and important development significance. At the
same time, there are also some problems and unfavorable factors.
Foremost, the political and economic development of different countries in the
“One belt one road” region is uneven, and there is a big difference in the degree of
emphasis on IPRs. The “One belt one road” region includes more than 60 countries
and regions. The political and economic development of each country and region is
quite different. The degree of awareness and importance of IPRs are also inconsistent.
Therefore, it will cause problems for China to implement overseas investment in
IPRs. At this stage, the cooperation between China and the countries in the “One belt
one road” region has undergone important changes. From the traditional industries
to the high-tech industries such as pharmaceutical manufacturing and electronic
equipment manufacturing, it has become an important part. In the high-tech industry,
the coordination and protection of intellectual property strategies have become a
key focus. If some countries and regions do not attach importance to intellectual
property protection in the field of high-tech industries, it will have many adverse
effects on China’s overseas investment intellectual property strategy.
61
Additionally, there is no relatively uniform intellectual property legal system

between countries in the “One belt one road” region. “The purpose of the legal system
is to have a very purposeful and rational purpose: to subordinate human behavior to
the guidance and control of general rules.” In modern society, effective international
cooperation cannot be carried out in the absence of a legal system, especially in the
field of intellectual property. At this stage, the intellectual property legal system of
the “One belt one road” countries differs greatly, and there is no relatively consistent
standard and system. At the same time, some countries in different countries have not
participated in, or are still affiliated with different IPRs. There are still differences
in the systems between international organizations or regional organizations.
“ONE BELT ONE ROAD” EXISTING INTELLECTUAL

PROPERTY PROTECTION SYSTEM IN THE BACKGROUND
The International Protection System for IPRs
At this stage, there are two modes for the protection of IPRs in major countries
in the world. One is the “monorail system” model of judicial protection, with the
court as the core institution for intellectual property protection. The court passed
the trial of intellectual property infringement cases and ordered the infringer to
assume the protection mode of legal responsibility such as stopping the infringement
and compensating for the loss. This model conforms to the concept of intellectual
property protection in modern society. Therefore, the monorail system of judicial
protection has been widely adopted by countries all over the world, especially in
developed countries such as the United Kingdom and the United States. One is
the “dual track system” mode in which both administrative protection and judicial
protection exist simultaneously and in parallel, and the administrative organs and
the courts simultaneously assume the functions of intellectual property protection.
After an intellectual property infringement dispute occurs, the right holder can
seek administrative protection from the administrative organ. Can also seek judicial
protection from the court.
China’s Intellectual Property Protection System
In the practice of intellectual property protection, China has formed an intellectual

property protection model of “two ways and parallel operation” of administrative
protection and judicial protection (Wu, 2009). This model is rooted in the state of
China’s social and economic development and the reality of intellectual property
protection and has also played an important role in the protection of IPRs in China.
62
Administrative Law Protection of IPRs
The administrative protection mechanism of IPRs in China is formed and developed

on the basis of fully considering the basic national conditions and the development of
IPRs. Some scholars pointed out that “in the face of severe international challenges
and increasingly fierce international competition, China’s administrative organs must
adopt more effective policy measures and strive to improve the level of intellectual
property administrative protection. Administrative protection can only be strengthened
and cannot be weakened.” (Qu & Zhang, 2011) At this stage, China’s intellectual
property administrative protection is mainly carried out by the State Intellectual
Property Office, the State Administration for Industry and Commerce, the National
Copyright Administration, the Ministry of Commerce and other state organs and
the local administrative departments under the above-mentioned ministries and
commissions.
Judicial Protection of IPRs
In terms of judicial protection, China’s current intellectual property judicial system

has played an important role in resolving disputes, coordinating contradictions, and
cracking down on infringement activities. The Supreme People’s Court has a special
intellectual property court, which is responsible for hearing relevant intellectual
property cases, conducting research, guidance, and supervision of national intellectual
property trials. Other people’s courts at all levels have also established intellectual
property trial organizations. A fully covered intellectual property litigation body
has been established from the grassroots court to the Supreme People’s Court. In
particular, the establishment of intellectual property courts has greatly enhanced
the intensity of judicial protection of IPRs in China. On August 31, 2014, the Tenth
Session of the Standing Committee of the 12th National People’s Congress voted
on the “Decision on the Establishment of Intellectual Property Courts in Beijing,
Shanghai and Guangzhou”, the establishment of the intellectual property court, the
jurisdiction of the case, and the appointment of judges. The regulations have provided
a legal basis for the establishment and operation of intellectual property courts.
The establishment of intellectual property courts in China is to strengthen the use
and protection of IPRs and to improve the incentive mechanism for technological
innovation.
63
“ONE BELT ONE ROAD” INTELLECTUAL

PROPERTY PROTECTION STRATEGY UNDER
THE STRATEGIC BACKGROUND
Strengthening Intellectual Property

Communication Among Countries
Strengthen intellectual property dialogue and cooperation between countries and

regions in the “One belt one road” region, through the official and folk channels
actively carry out dialogue and cooperation and exchange mechanisms. On the one
hand, we will continue to strengthen dialogues between China and the national
intellectual property management institutions in the “One belt one road” region,
establish regular communication and exchange mechanisms, promote bilateral and
multilateral cooperation, coordinate and standardize, institutionalize construction,
sign intellectual property memorandums of understanding, and establish peace.
The intellectual property protection environment that coexists, promotes and
develops together (Wang, 2016). On the other hand, it seeks to use civil forces to
actively engage in dialogue and consultation. At present, China’s large multinational
enterprises have made great progress in both quantity and scale, and gradually
occupy core positions or gain a dominant position in various fields of the world
(Pan, 2015). These large multinational enterprises can seek regional and regional
development according to their own advantages. Civil dialogue and exchanges to
promote cooperation and win-win.
Strive to Build “One Belt One Road” Regional

Intellectual Property Integration System
The unbalanced development of political economy and culture in the “One belt
one road” regions and regions has made the level of awareness and importance of
IPRs in different countries and regions different. Some countries such as Singapore
and Hong Kong have higher levels of protection. However, some countries and
regions lack intellectual property protection due to economic backwardness and
perennial war. Therefore, promote the integration of regional intellectual property
systems, reduce the differentiation of intellectual property standards, adhere to the
implementation of the “One belt one road” strategy and the integration of regional
intellectual property systems, and integrate regional intellectual property integration
rules with international intellectual property rules (Wu, 2016). Strive to integrate
regional IPRs and standardization system on the basis of regulatory integration.
64
Establishing the “One Belt One Road” Intellectual Property

Information Platform and Intellectual Property Database
There are three regional intellectual property organizations with a certain scale in
the “One belt one road” area, namely the ASEAN Intellectual Property Cooperation
Organization, the Eurasian Patent Organization, and the European Patent Organization.
These three organizations are established to strengthen knowledge in the region. The
construction of property rights protection, drawing on IPRs contradictions and disputes
and improving the level of intellectual property development in the region. At this
stage, China and ASEAN countries have signed a number of bilateral and multilateral
cooperation treaties in the field of intellectual property protection, forming a good
cooperative relationship. At the same time, China and Eurasian patent organizations
and European patent organizations are also developing and consolidating cooperation.
Therefore, we should make full use of the existing cooperative relationship between
China and the above three regional intellectual property organizations, establish a
“One belt one road” intellectual property information platform and an intellectual
property database, and we can adopt regular dissemination of relevant intellectual
property data information to strengthen “One belt one road” intellectual property
information sharing in the region, reducing information barriers.
Formulating an Effective Intellectual Property

Risk Prevention Mechanism
With the continuous advancement of the “One belt one road” strategy, the scale
of “going out” of Chinese enterprises has continued to grow, and the number of
infringement disputes involving IPRs will increase significantly. Therefore, it is
necessary to formulate reasonable and effective risk prevention mechanisms and
dispute resolution mechanisms. In the aspect of intellectual property risk prevention,
an intellectual property insurance system can be adopted. It is an effective risk
management system to reduce the risk of intellectual property infringement through
the intellectual property insurance system. The intellectual property insurance system
is an effective intellectual property risk management measure with low investment,
high return, and a strong guarantee (Zhang, Wang & Li, 2015).
65
REFERENCES
Hong, W. (2016). Strategic Collaboration between “Belt and Road” and Intellectual
Property Rights. Frontline, (10), 70.
Luo. (2018). The Belt and Road Initiative and China’s Strategic Vision. Yunmeng
Journal, (4), 63.
Pan. (2015). On the Protection Model of Intellectual Property Internationalization
and China’s Coping Strategies. Law Review, (1), 159.
Qu & Zhang (2011). Research on Administrative Protection of Intellectual Property
Rights. Political and Legal Studies, (3), 57.
The National Development and Reform Commission. the Ministry of Foreign
Affairs, & the Ministry of Commerce. (n.d.). Vision and Alignment to Promote the
Construction of the Silk Road Economic Belt and the 21st Century Maritime Silk Road.
Retrieved from http://www.xinhuanet.com/finance/2015-03/28/c_1114793986.htm
Wen, Junrong, & Wei. (2014, June 30). New Silk Road: Through Common Prosperity.
The People’s Daily.
Wu, H. (2009). Evaluation and Reflection on China’s Intellectual Property Legal
System Construction. Chinese Law, (1), 57.
Wu, H. (2016). “One Belt and One Road” Strategic Conception and Intellectual
Property Protection. The Rule of Law Society, (5), 11.
Wu, H., & Futao, L. (2013). The Concept and Policy of China’s Intellectual Property
Judicial Protection. Contemporary Law, (6), 42.
Zhang, C., Gao, X., & Cao, H. (2015). Research on the Path of China’s Overseas
Intellectual Property Protection under the Background of the Belt and Road Initiative.
Science Management Research, (5), 7.
Zhang, Z., Wang, L., & Shan, L. (2015). Intellectual Property Strategy under the
“One Belt, One Road” Strategic Concept. Chinese Inventions and Patents, (6), 111.
66
67
Chapter 5
Research on Protection
and Development of
Intellectual Property in
China From the Perspective
of “The Belt and Road”
Ping Zhou
Fuda Li
Linling Zhong
University of Nottingham Ningbo China, China
ABSTRACT
With the continuous upgrading of the economical industry structure and the gradual
optimization of the excess capacity, China has begun to get rid of the name “world
factory” of “processing with imported materials.” However, there are problems still
existing, such as the contradiction between enterprises’ poor independent innovation
ability and consumers’ increasing demands on product quality. Enterprises in China
have the great opportunity to “go out” because of “The Belt and Road” strategy,
but it is extremely complicated in legal system, customs, and social culture, which
means how to use of intellectual property in China coexists risks and opportunities
for enterprises. This chapter focuses on analyzing problems of intellectual property
rights in China and the importance of the protection and development of intellectual
property. In addition, this chapter studies strategies that can be provided for the
protection and development of intellectual property in China from the perspective
of “The Belt and Road.”
DOI: 10.4018/978-1-5225-8440-7.ch005
Research on Protection and Development of Intellectual Property in China”
CURRENT SITUATION OF PROTECTION AND DEVELOPMENT

OF INTELLECTUAL PROPERTY IN CHINA FROM
THE PERSPECTIVE OF “THE BELT AND ROAD”
The Change of Industrial Structure in China
In recent years, China’s industrial structure is improving day by day, and the
optimization of industrial structure has made some progress. Firstly, the primary
industry’s share of GDP has become more stable. Then, the share of secondary
industry has gradually declined, along with little fluctuation, and maintained its due
stable share. Finally, the tertiary industry’s share of GDP has soared. It can be seen
from this data that the industrial structure has reached a relatively ideal situation
in the traditional sense.
China’s manufacturing industry was severely impacted after the global financial
crisis in 2008. So the Chinese government was determined to transform and upgrade
the economical industry structure in order to enhance China’s ability to resist risks
and to sustain economical growth in the future (Fei & Yan, 2007). In this process,
there are two problems. Firstly, there is an intellectual property dispute between
China and the original owner of the intellectual property when China introduced the
technical knowledge. Secondly, China needs to protect the technological knowledge
of its independent innovation while “going out”. This is the intangible asset, which
represents the core competence of China and Chinese enterprises, will help China
win a place in the world in the future.
Complex Internal Market in China
The movie Dying to Survive which was released in July 2018, reflects the problem in
dealing with intellectual property under a certain circumstance in China. On the one
hand, the public authority needs to maintain the dignity of the law,so the behavior
of the infringement of intellectual property has to be punished. On the other hand,
the normal Chinese patients have to face the contradiction between the desire of
survival and the unaffordable medical bills. Pharmaceutical manufacturers invest
a lot of money and manpower to develop drugs. In order to retrieve the costs, they
can only choose to price the medicine to a very expensive level. The contradiction
among the three parties is also reflected in other areas of intellectual property in
China. On eighteen October, 2017, on the 19th National Congress of the Communist
Party of China, the Chinese President Xi Jinping emphasizes that socialism with
Chinese characteristics has crossed the threshold into a new era and the principal
contradiction Chinese society has evolved—what we now face is the contradiction
68
between unbalanced and inadequate development and the people’s ever-growing needs
for a better life (State Intellectual Property Office, 2015, 2018). Human-being is born
to be rational and draw on the advantages and avoid negative factors. People can be
influenced by politics, economics and culture which are corresponding to power,
capital and knowledge. Under the highly centralized and unified conditions, people
need security most, and individual rationality is up to its potential. The survival of
knowledge depends on the free public atmosphere, which is exactly the premise of
cultivating public rationality, and it is also the expectation to reach a balance among
power, capital and people. However, any public problem is essentially the result of
the behavior of the elite class presented at the grassroots level. Without competition
and supervision, the strong force is inevitably self-collapse, and there is no normal
public sphere to buffer. Accumulated distrust endangers life. So from the perspective
of consumers, government and enterprises, consumers need the cheaper medicine
to survive, while enterprises need to retrieve costs and pursue profits in order to
continue developing new medicine, and the government needs a balance between
order and development to maintain its own rules.
Intellectual property in China now is facing a dilemma. The government needs
the development of enterprises to promote economic growth and consumers need
cheap and fine products and their demand for quality is higher than before. But
the reality is that on the one hand, the products based on enterprises’ independent
research are difficult to meet the requirements, on the other hand, the independent
innovation products are susceptible to plagiarize and the development costs are
unbearable. Thus, enterprises were forced to plagiarize the intellectual property of
other companies in order to achieve profit quickly.
Increase of Friction in the World Economy
Trump, the new president of the United States, maintains its own hegemony to
protect the trade interests, and violates principles of World Trade Organization
(WTO) regardless of other countries’ objection. Plus, he launched a trade war
against China and even made trade contradictions and conflicts with American
“Allies”, which severely damaged free trade order based on the WTO. In the “301
investigation” launched by the United States against China in August 2017, the
purpose of the United States is to make sure that the laws, policies and practices
related to technology transformation, intellectual property and innovation by the
Chinese government are unreasonable or discriminatory, which would constitute
a burden or restrict American businesses. [4]Although this is a “war” initiated by
the United States, China should also improve its weaknesses when dealing with
other “big event”. China can better protect intellectual property since the reform
69
and opening-up, but it is undeniable that the current level is difficult to meet the
standards of developed countries, because it is related to economical development.
In this increasingly competitive world, it is an inevitable choice to strengthen the
protection of intellectual property in order to break through China’s economic slump
and make a difference.
China can take the advantage of the new conditions created by “The Belt and
Road” strategy, so that China not only can provide opportunities for optimization of
the spatial pattern, but also provide new growth for China’s economic development.
The Status of Intellectual Property Protection and

Development in Countries Along “The Belt and Road”
There are more than 100 countries along “The Belt and Road”(original 64 countries)
and international organizations expressing their active support and participation
by 2016. More and more countries are involved. There are differences in political,
economical, legal and cultural aspects among countries. On the one hand, some
countries have relatively better intellectual property protection, such as developed
countries in Europe and Singapore in Southeast Asia. On the other hand, intellectual
property protection in some countries is not mature and the system is not perfect,
which causes the protection of intellectual property weak. Therefore, the level of
intellectual property protection along “The Belt and Road” is in a state of bifurcation,
which requires China to implement an appropriate protection strategy based on local
conditions (State Intellectual Property Office, 2015).
The Status of Communication About Intellectual Property

Between China and Countries Along “The Belt and Road”
At a press conference in Beijing Monday, Spokesperson for China State Intellectual

Property Office, Hu Wenhui, said that in 2017, there are 5608 patent applications
of China in countries along “The Belt and Road”, reported a 16 percent year-on-
year rise. While there are 4319 patent applications of the countries along “The Belt
and Road” in China, reported a 16.8 percent year-on-year rise. Four new countries
have applied for patents in China, bringing the total to 41 countries, indicating that
China’s “The Belt and Road” has begun to yield results. But there are also problems
coexisting.
In China, the distribution of relevant nation’s patent applications is uneven,
compared with other countries, such as Russia, India, Israel, Turkey and other countries
that have early intellectual property legislation, and relatively consummate system.
These countries’ intellectual property is developing vigorously, which leads to the
70
uneven patent distribution (USTR, 2017). In 2017, patent applications of countries

along “The Belt and Road” (not including China) rose 16 percent year-on-year,
involving 17 countries (India, Russia, Singapore, Vietnam and Poland account for
91.7%) from the data published by the State Intellectual Property Office.The layout
of patent applications is highly centralized. [8] There are two imbalances existing.
First of all, the number of countries for patent applications is small, which is only
about 25%. Secondly, the number of patent applications is too concentrated, and a
few countries almost have a monopoly on patent applications.
According to the statistics of the State Intellectual Property Office, there is still
a significant gap between the world intellectual property powerhouse and China. In
2017, the number of patent applications published by the United States, Japan and
Germany and the other countries along “The Belt and Road” was higher than that
in China: 8.8 times, 2.6 times and 1.6 times respectively (Zhang, Wang & Li, 2015).
Therefore, although the cooperation of intellectual property between China
and countries along “The Belt and Road” is progressing steadily, China has not
yet reached the dominant position due to two major problems. The first problem is
that the number of patent applications which is entirely public is small and highly
centralized. The second is that the number of patent applications is obviously lower
than that of the world’s developed countries, which is difficult to surpass in the
short term.
The Status of Communication About Intellectual Property

Between China and Countries Along “The Belt and Road”
Before the implementation of “The Belt and Road” strategy, countries along the line
have already formed several regional or targeted intellectual property cooperation
platforms and organizations, such as ASEAN (the Association of Southeast Asian
Nations), and European Patent Organization and Eurasian Patent Organization. The
causes and backgrounds of these organizations are different, and the intellectual
property issues concerned by member states are also different. Thus, there must
be some contradictions in the intellectual property protection system, mainly
embodied in the following aspects. First of all, the regional intellectual property
organizations and platforms are set up for their own area of conflict resolution, in
order to strengthen the regional intellectual property exchanges and promote the
development of intellectual property. These organizations have strong provincialism
and characteristics, which means it is impossible to suit for any countries. Secondly,
every region has to protect their own interests, so they will establish the protection
rules against non-regional countries to the maximum extent, which is not conducive
to the integration of regional patent system and external patent system. Thirdly, due
71
to the long existing of regional patent organizations, the member states in the region
have varying degrees of adaptation. If they are required to accept new intellectual
property system and rules, it is very difficult to control the cost and willingness.
Anyhow, setting up a suitable intellectual property system under the background
of “The Belt and Road” should adjust interests of all aspects, because intellectual
property is a legal concept, and it has its own internal unity, which can result its
maximum internal advantage trough seeking common ground while reserving
differences. Then, it can help establish a fair and universal system. In the initial stage
of integration, intellectual property protection system can absorb the advantages
of various organizations, and then gradually form a complete and unified system.
THE REASON OF PROTECTING AND

DEVELOPING INTELLECTUAL PROPERTY IN THE
BACKGROUND OF “THE BELT AND ROAD”
External Reason: A New Chance for

China to Adjust its Strategy
A New Chance to Break American Hegemonism
At present, international economic frictions are escalating. There are trade war
between China and the United States. Then the United States began to set up trade
tariff barriers against the European Union, Canada and other old Allies. This kind of
measurement fully embodies the hegemony of the United State. After the president
of the United States—Trump came to power, he continuously Implement the policy
“Let the United States Return to Greatness”, which radically speaking is containment
and suppression strategy used to against China—the world’s second largest economy
and a second country can threaten America’s own global economic hegemony. (Japan
is the first) All this is based on its overall national interest.
According to Yi Jiming’s point of view, a professor from Beijing university,
incidents in the south China sea, the Diaoyu islands and the Taiwan issues, China
effectively resolve the crisis through the TaiChi Theory, and actively advocate
“The Belt and Road” construction and globalization, which made the United States
in a passive position (Yi & Li, 2018). Therefore, the United States seizes China’s
weakness, using trade and intellectual property to force China to yield and to achieve
the goal of containing China’s development.
In the international economic pattern, the United States adopts the principle
of isolation, and Geopolitical blockade China like a letter “C”. America also uses
its own economic juggernaut status in order to exclude China from Trans -Pacific
72
Partnership Agreement (TTP) and Transatlantic Trade and Investment Partnership

Agreement (TIPP). China’s corresponding strategy is establishing “The Belt and
Road”. Now the United States utilizes the intellectual property and trade friction,
so China’s response strategy is also based on the development and protection of
intellectual property in the context of “The Belt and Road”. China has to strengthen
its own weaknesses.
A New Chance to Establish China’s Core Competitiveness
The world has experienced several industrial revolutions as the economy is

developing steadily. However, the world has entered the era of knowledge economy
that Innovation is the soul key after the 21st century. From the macroscopic analysis,
paying attention to the intellectual property protection is an important foundation
for a country to maintain sustainable development and to keep a leading position
in the world economy. From microscopic analysis, Intellectual property strategy is
an important part of the enterprise development, and enterprises which have the
independent innovation ability can maintain their core competitiveness in the market
under the brutal elimination, and enterprises which develop through the intellectual
property, especially small and medium-sized enterprises, usually accomplish a great
task with little effort by clever maneuvers.
According to the statistics released by the State Intellectual Property Office,
Main Statistics Report on China’s Patent Intensive Industries (2015) pointed out
that China’s patent labor-intensive industries are capable, and the added value of
China’s patent labor-intensive industries from 2010 to 2014 amounted to 26.7 trillion
yuan, accounted for 11.0% of the total GDP, and the average annual real growth is
16.6%, which is twice the average annual real growth rate (8%). [9]Although the
longitudinal data of China’s intellectual property industry is very optimistic, the
industry is still insufficient if compared horizontally in the world. For example,
on 25 October, 2016, the European Patent Office (EPO) and the European Union
Intellectual Property Office (EUIPO) released the Labor-Intensive Industry of
Intellectual Property and Its Economic Performance in the European Union Report
(hereinafter referred to as the “report”) and according to the report, the European
Union’s total GDP during 2011-2013 is about 13.4 trillion euros, and 42.3% generated
by labor-intensive intellectual property. [10]The European Union’s intellectual
property industry contributes far more to GDP than China’s. So it can be seen that
China’s development advantages based on intellectual property in international
development is not obvious (see Table 1).
To re-examine the existing countries along “The Belt and Road”, most of them
still belongs to developing countries, and their economic strength is relatively weak.
Using intellectual property index can clearly distinguish the competitiveness of
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Table 1. Labor-intensive industry
Added Value/GDP (Millions of

Labor-Intensive Industry Proportion of EU GDP
Euros
Trademark intensive industry 4812310 35.9%
Design intensive industry 1788811 13.4%
Patent intensive industry 2035478 15.2%
Copyright intensive industry 914612 6.8%
Geography intensive industry 18109 0.1%
Plant variety intensive industry 51710 0.4%
All intellectual property intensive
5664168 42.3%
industry
Total GDP of EU 13387988 100%
Note Appended: Because of the overlapping use of IP power, the sum of individual industry exceeds the sum
of intellectual property labor-intensive industries.
different countries in the field of innovation. The higher of the value, the clearer
the property rights. According to 2014 World Intellectual Property Index released
by World Intellectual Property Organization(WIPO), Intellectual property index
is relatively low in both Central and South Asian countries, but relatively high in
Singapore and Malaysia in Southeast Asia. As an advocate “The Belt and Road”,
China must set an example by advocating the protection of intellectual property, and
at the same time set a keynote for its future development direction. Then China can
lead the rest of the developing countries in the region to achieve common interests.
Above all, on the one hand, China is not competitive compared to the developed
regions and countries in the world in spite of its rapid development of the intellectual
property industry. Besides, intellectual property as the core part of the future
knowledge economy, must be paid more attention, so under the background of
“The Belt and Road” strategy implementation, China strengthens the protection of
intellectual property and promote the development, and also to build China’s core
competitiveness in the severe international economic pattern.
Internal Reason: A New Direction for China

to Upgrade Industrial Structure
China’s industrial structure has tended to be stable, forming a pattern of taking the
primary industry as the foundation, the secondary industry as the pillar and the
tertiary industry leading the economy. However, the prominent problem that restricts
the transformation and upgrading of making China’s secondary industry as the
main industrial structure is that there is no manufacturing ecosystem matching the
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upgrading consumer structure. Small and scattered manufacturing enterprises lack

basic capabilities of product quality and product design, and also lack innovative
R&D capabilities in key spare parts and high-end production equipment, leading
to the serious loss of craftsmanship and professionalism (Zhang, 2016; Zhang, Gao
& Cao, 2015). In daily life, the rise of overseas purchases and the popularization of
luxury brands are popularized, which can be expressed as “I can’t get what I want in
China, but I don’t want made in China”. The structure of Chinese consumer demand
is changing from low-end demand to medium-high-end demand. This is also the
current situation in China and the direction of optimization in China.
On the one hand, China’s market has the greatest consumption potential in the
world, on the other hand, China is short of independent innovation ability, and product
quality is difficult to upgrade and there are imitation and plagiarism prevailing, so
China is gradually eliminated by international market. Since China’s accession to
the WTO, the market has gradually opened up, and the Chinese government is also
steadfastly implementing the policy of reform and opening up, which shows that it is
increasingly difficult for enterprises which is short of independent innovation ability
to survive only by national coercive force. Enterprises’ profits and development
based on the “combination of government and business + government preferential
policy dependence” must be hit severely.
In short, after the reform and opening up, enterprises, which rely on government
support and assistance to develop, has no longer adapted to the increasingly fierce
competition in the world. Enterprises must seize the opportunity created “The Belt
and Road”, improve the capability of independent innovation, and strengthen the
development and support of China’s intellectual property industry, so they can
progress in the industrial structure optimization in the future.
CHINA’S STRATEGIES OF INTELLECTUAL

PROPERTY PROTECTION AND DEVELOPMENT
UNDER “THE BELT AND ROAD”
China’s Domestic Strategies of Intellectual Property

Protection and Development Under “The Belt and Road”
Establishment and Improvement of Intellectual Property Courts
China is paying more attention to intellectual property, and gives it judicial

protection. Continuous improvement of the judicial level of intellectual property
is also an important task in implementing China’s judicial reformation. In China’s
economically developed regions, intellectual property disputes have led to a surge
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in the number of cases. Conventional civil trials are unable to meet the quantity and
professional requirements. That is why in the 2015, special courts for intellectual
property come into being in Beijing, Shanghai and Guangzhou, which shows that
China’s determination to strengthen intellectual property protection and also proves
that in the future, China may promote the establishment of intellectual property
courts throughout the country to ensure the leading role of judicial protection when
it comes to intellectual property, and also effectively protect the incentive role of
intellectual property for economic development. So China’s independent innovation
environment can be well optimized.
To Make the Macroeconomic Regulation

and Control at Full Capacity
China’s is a developing country and this is based on the basic national conditions.
China’s reform and opening up has just passed 40 years, while the developed
countries in Europe and the United States have gone through hundreds of years on
the road of intellectual property development. This will inevitably lead to China’s
intellectual property protection and development in an imperfect state, so the way
of dealing with intellectual property disputes should also be based on specific
national conditions. Under the condition that China has entered a new era of social
change, the contradictions in the complex economic development are constantly
emerging. How to deal with the interests among the government, enterprises
and consumers is an unavoidable topic, and the existence of intellectual property
will have a considerable impact on some aspects. For example, some companies
produce products that infringe intellectual property by copying and imitating, which
can benefit consumers in the short term. However, in the long run, once the self-
innovative enterprises find that the products they invested in are easy to be “stolen”
by others. What is more, the self-innovative enterprises’ profits are more difficult to
obtain. So they will fall into an embarrassing cycle of “bad money drives out good”.
Ultimately, it is the consumers themselves who are injured. The key to change this
cycle relies on the government: how the government handles it and how to balance
the interests of all parties.
Strengthening Judicial Function and Reducing

Administrative Interference
After 40 years of reform and opening up, China still has some traces of the planned
economy era, such as policy-dependent enterprises, and even some zombie
enterprises. Of course, the Chinese government is also trying to transfer from a
“management-oriented government” to a “service-oriented government”. Under
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the general circumstance, an important issue in China’s judicial reform is to reduce

the administrative interference on justice.
China has always adhered to the policy of focusing on economic construction
since the reform and opening-up, and has penetrated into the hearts of every
administrative official in the administrative region which has always been “caring”
for local enterprises and often elected interests of local tax-paying enterprises
compared to the interests of intellectual property. So when it comes to intellectual
property disputes, local administrative leaders always have various excuses to exert
pressure on the local judiciary to ensure that local enterprises can profit from the
disputes or not lose too much.
Therefore, in order to protect and develop intellectual property rights in China, we
must strengthen the role of justice and reduce administrative interference. Specifically
speaking, it can be divided into several steps: firstly, judiciary’s property should be
independent, and directly be managed by the higher levels of the judiciary; secondly,
judiciary should establish the authority, and strengthen the popularization of the law
in order to promote the development of the law, so that the concept of intellectual
property can come into the hearts of the people; thirdly, government should use a
variety of channels for supervision. If power loses supervision, it will inevitably
lead to corruption and corruption is also a major obstacle to the development of
intellectual property right.
China’s International Strategies of Intellectual Property

Protection and Development Under “The Belt and Road”
Construction of International Intellectual Property

Communication and Cooperation Platform
The politics, economic, culture and other aspects of the countries along “The Belt and
Road” are very complex and intellectual property is closely related to the public power
of a country. It is a manifestation of the regulatory capability. Governments should
cooperate with each other to establish a set of long-term and effective platform for
the protection and development of intellectual property. Some scholars believe that
on the one hand, China should actively participate in the formulation of the rules of
the International Intellectual Property Organization, in order to implement the rules
of intellectual property in countries like China in the stage of economic transition.
On the other hand, we should strengthen the cooperation with relevant countries on
intellectual property, and sign agreements on intellectual property protection, and
urge relevant countries to protect intellectual property (Yi & Li, 2018).
China should also cultivate its own legal talents who can handle intellectual
property disputes and problems, in order to cope with the future development of
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“The Belt and Road”. On the basis of communication and international trust, the
exclusive intellectual property framework of “The Belt and Road” should be set up to
deal with intellectual property competition among countries and regions throughout
the world after the completion of the personnel training system.
Exploring and Building an Integrated System of

Intellectual Property in “The Belt and Road” Area
With increasingly fierce international competition, “The Belt and Road” has been
stimulated by various reasons to break through the US military and economic strategic
strike, and now almost all regions in the world have their own regional economic
integration system or agreement system. For example, the European Union, the
TPP or TIPP, all have their own rules of economic operation. China’s “The Belt
and Road” should also establish its own integration system, and the most important
one is the regional intellectual property integration system.
The construction of the intellectual property integration system in “The Belt and
Road” area has the following advantages: firstly, it can reduce the economic frictions
between participating countries, and provide a consultative mode for them; secondly,
on the basis of meeting the minimum standards of international intellectual property
protection, it can also protect the intellectual property of all countries according
to their levels of intellectual property protection, so that they can achieve mutual
benefit and win-win situation; finally, the integration system can also enable the
participating countries to enhance their ability to resist risks, such as the global
trade frictions caused by the United States. If the integrate system of intellectual
property can be completed in advance, participating countries are strong enough to
fight back effectively and to better safeguard their own interests.
The Protection and Development of International

Multilateral Intellectual Property Based on
the Common Aspiration of the People
On 28 March, 2015, China clearly pointed out that “The Belt and Road” will
be strengthened in cooperation management from five aspects, namely, policy
communication, facilities interconnection, trade unimpeded, financing and common
aspiration of the people. In ancient China, there is an old saying: water can carry
a boat, and it can also overturn the boat. If we want to build “The Belt and Road”,
we will need the support of the participating countries and will need to improve
mutual understanding and increase interaction among people. This is the basis for
regional cooperation and an important foundation for the formation and development
of intellectual property.
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Promoting the “common aspiration of the people” is the prerequisite for solving
the multidimensional regional problems including customs, habits, and mixed
religious beliefs with many nationalities. This is an internal and external problem
before implementing “The Belt and Road”.
Regional Contradiction
The ASEAN Intellectual Property Cooperation Organization, the European Patent

Organization and the Eurasian Patent Organization have already existed before “The
Belt and Road”. Besides, “The Belt and Road” is an open propose. There will be more
countries and regions involved in the future. Therefore, when it comes to the inherent
system and rules of regional organizations, the important issue is to discuss how to
solve the contradictions among regional organizations, and contradictions between
regional organizations and non-regional organizations. The common aspiration of the
people will help countries to deepen strategic mutual trust, deepen understanding and
eliminate doubts, which will help countries to participate actively in the construction
of “The Belt and Road” through multiple channels of communication.
External Influence
Due to historical and realistic reasons, conflicts about the interests of the border and
natural resources exist between some countries and China. Some irresponsible media
in Europe and the United States continue to brag about the “China Threat Theory”,
so that the countries and regions along “The Belt and Road” have some doubts about
China (Hu, 2017). If China wants to break these false statements from Western
countries, it should constantly promote its own values of peaceful development on
the basis of promoting the common aspiration of the people. Specifically, in the
process of “going out”, enterprises should pay attention to their social responsibility.
According to the different cultural customs of different countries and regions,
enterprises should timely communicate with local people, and strengthen mutual
trust. Respecting local intellectual property rules is an important way to safeguard
the international image of Chinese enterprises. The starting point is respecting
and protection of intellectual property and the basis is the common aspiration of
the people, China will, after a certain period of time, accumulate the trust of all
parties, and form a multilateral and mutual trust mechanism for the protection and
development of intellectual property.
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Prospects for Intellectual Property Cooperation Between

China and Countries Along “The Belt and Road”
China started relatively late in the field of intellectual property protection. Although
it has gone through 40 years of reform and opening up, its intellectual property
development history is still pale compared with that of the western developed countries
which have been developing for hundreds of years. Besides, due to historical reasons,
cooperations of business and politics among China and countries along “The Belt and
Road” have started relatively late. However, China, driven by the values of peaceful
development, will adhere to the principle of multilateral mutual benefit and win-win
situation and gradually establish mutual benefit and mutual trust with the countries
along the line on the basis of common aspiration of the people. The cooperation
among China and countries along the line needs time to constantly ameliorate the
status quo. We believe that differences in religion, customs, legal systems and other
aspects will be inclusive and understood through the continuous development of the
economy. This is a long-standing process that requires joint efforts from all sides.
80
REFERENCES
Fei & Yan. (2007). Regional Practice of the Patent’s International Protection and
Patent’s Unification in Europe. Journal of Dalian Maritime University: Social
Science Edition, (6), 15-18.
Hu. (2017). China’s Patent Applications to “The Belt and Road” Related Countries
Show A Favorable Growth Trend. Academic Press.
State Intellectual Property Office: Main Statistical Data Report on China’s patent
intensive industries. (2015). State Intellectual Property Office: A review of Intensive
Intellectual Property Industries and Its Economical Performance in the European
Union.
State Intellectual Property Office: Statistics on Patent of Countries along “The Belt
and Road. (2018). Patent Statistics Bulletin, 2018(1).
USTR. (2017). Announces Initiation of Section 301 Investigation of China. Retrieved
from https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/
august/ustr-announces-initiation-section
Yi & Li. (2018). The United States Launched 301 Investigation into China and
China’s Countermeasures. Journal of Northwest University (Philosophy and Social
Sciences Edition), (1), 65-81.
Zhang, Gao, & Cao. (2015). Research on China’s Overseas Intellectual Property
Protection under the Background of “The Belt and Road”. Scientific Management
Research, (5), 5-9.
Zhang, Z., Wang, L., & Shan, L. (2015). Intellectual Property ProtectionStrategy
under the Concept of “The Belt and Road”. China Invention & Patent, c(06), 107–112.
Zhang. (2016). Obstacles, Predicament and Reform Prospects in the Transformation
and Upgrading of China’s Industrial Structure. Journal of Renmin University of
China, (5), 29-37
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Chapter 6
Intellectual Property
Protection Strategy Under
the Belt and Road Initiative
Yong Zhang
University of Macau, China
ABSTRACT
After the belt and road initiative was put forward, the relevant domestic regions
responded positively and carried out research work in succession, making suggestions
for the implementation and planning of the belt and road initiative. However, the
relevant research work mainly focuses on the political, economic, and cultural
problems existing in the implementation of the belt and road initiative. The research
on intellectual property protection issues has rarely been reported. By analyzing
the intellectual property environment both of domestic and international in which
the belt and road initiative located, this chapter focuses on the intellectual property
protection strategy in the implementation of the belt and road initiative, aiming at
providing reference for intellectual property research under the belt and road initiative.
INTRODUCTION
The “Belt and Road” is the abbreviation of “Silk Road Economic Belt” and “21st
Century Maritime Silk Road”. In September 2013, President Xi Jinping first
proposed the idea of constructing the “Silk Road Economic Belt”. In October 2013,
he attended the APEC Leaders’ Informal Meeting and proposed the “21st Century
Maritime Silk Road” initiative. In November 2013, the belt and road initiative was
DOI: 10.4018/978-1-5225-8440-7.ch006
Intellectual Property Protection Strategy Under the Belt and Road Initiative
written in the “Decision of the Central Committee of the Communist Party of China
on Several Major Issues Concerning Comprehensive Deepening Reform” and was
listed as the one of most important tasks of the main economic work in 2015 at the
Central Economic Work Conference held in December 2014.
The belt and road initiative gives the ancient “Silk Road” a new era connotation.
It is a national development strategy put forward by China in the new period of
deepening reform and opening up. It aims to promote the economic and trade
development between China and the countries along the route. On the basis of mutual
trust and peaceful cooperation, we will take advantage of geographical proximity and
economic complementarity to achieve mutual benefit and win-win. The Belt and Road
Initiative benefits many countries and regions along the route, which is conducive
to the harmonious development of regional economic integration and economic
globalization, improving the imbalance of world economic development, promoting
the multi-polar development of international economic and trade, and accelerating
the formation of a new pattern of international trade. On the other hand, the belt
and road initiative has further optimized the spatial pattern of China’s economic
development and provided a new growth point for China’s economic development.
At present, China’s economic development has entered a new normal, economic
structure and industrial structure have been deeply adjusted, and innovation has
become the main driving force for economic development. Innovation is inseparable
from intellectual property protection. With the deep integration of intellectual
property and economic development, intellectual property has become a key factor
in stimulating innovation and supporting the new normal of economic development.
However, since the belt and road initiative involves multiple countries and
regions, the intellectual property environment along the belt and road initiative is
complex. The differences in domestic intellectual property systems are bound to
make conflicts among them. How to properly use the intellectual property strategy
to escort the implementation of the belt and road initiative is a problem that deserves
the attention of all of us.
STATUS OF CHINA’S INTELLECTUAL PROPERTY RIGHTS
Since the implementation of the national intellectual property strategy in 2008,

China’s intellectual property legal system has been gradually improved, the level
of law enforcement has been continuously improved, the number of intellectual
property rights has grown rapidly, international exchanges in the field of intellectual
property have increased, and international influence has gradually increased. At
the same time, the implementation of the belt and road initiative will lead to the
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adjustment of the intellectual property order in the international region. As more and
more Chinese companies enter the international market, international intellectual
property disputes that Chinese companies encounter overseas will grow rapidly.
China’s Patent Applications to Countries Along the Route
On the one hand, from the analysis of patent application data, in the past 10 years,
China has applied for about 14,000 patents to 27 countries along the route, but only
accounted for 0.6% of the total number of patent applications accepted by these
countries, and the amount of patent applications is very small compared with other
countries (below 3%). It can be seen from the Table 1, the countries that apply for
patents in China are mainly regional powers and countries with close economic
relationship with us, including India, Russia, Singapore and Israel.
On the other hand, from Figure 1, we can see the trend of patent applications.
Since 2013, the amount of China’s patent applications in the main target countries
that along the belt and road initiative, such as, India, Russia, Singapore, and so on,
have continued to grow rapidly.
According to the data released by the Planning and Development Department
of the State Intellectual Property Office, in 2016, the number of patent applications
filed in India was 3,017 (1.7 times that of 2015), and the number of applications
in China’s patent applications to countries that along the “Belt and Road” ranked
Table 1. The status of patent applications in major countries along the route and
the entry of Chinese patent applications
Amount of Amount of The Percentage of

Total Amount Amount of
Foreign Patent Chinese Patent Amount of Chinese
Countries of Patent Domestic
Application Application Patent Application
Application Application
Entry Entry Entry
Russia 71.2 57.1 14.1 0.220 1.6
India 31.5 6.9 24.6 0.650 2.7
Poland 26.1 12.8 13.3 0.010 0.1
Ukraine 12.7 10.6 2.1 0.010 0.5
Hungary 11.6 4.9 6.8 0.003 0.1
Singapore 10.8 0.7 10.1 0.190 1.9
Israel 9.1 1.8 7.3 0.010 0.1
Czekh 7.7 3.8 3.9 0.005 0.1
Roumania 7.0 4.2 2.8 0.001 0.1
Turkey 6.2 3.3 2.9 0.010 0.5
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Figure 1. Trends of China’s application in the major countries from 2006 to 2016
first; the number of patent applications in Russia was 789, ranked second; Singapore
(425), Thailand (300) and Vietnam (285) were ranked 3rd, 4th and 5th respectively.
The sum of patent applications in India and Russia accounted for 78.7% of the total
number of patent applications in China along the “Belt and Road”, indicating that
China’s patent applications in the “Belt and Road” countries are more concentrated,
indicating that the patent layout is imperfect.
Domestic IP Enforcement
With the implementation of the national intellectual property strategy, the judicial
protection of intellectual property rights has also been given full attention. The
courts has continuously strengthened the judicial reform of intellectual property
rights, implemented the requirements of judicial protection of intellectual property
rights in the national intellectual property strategy, and continuously improved the
jurisdiction of intellectual property rights. In 2015, the intellectual property courts
in Beijing, Shanghai and Guangzhou began to operate, and the establishment of the
special court for intellectual property rights demonstrated China’s determination to
increase the judicial protection to intellectual property rights.
Figure 2 shows that the trend of the new and concluded intellectual property
civil first-instance cases of the National People’s Court of the People’s Republic
of China from 2010 to 2013. It can be seen that the National People’s Courts have
newly received and intellectual property civil first-instance cases respectively from
2010. 42,931 pieces and 41,718 pieces rose to 88,583 pieces and 88,286 pieces in
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Figure 2. Amount of the new and concluded intellectual property civil first-instance
cases of the courts
2013. The data show that China’s intellectual property judicial trials have achieved
remarkable results, and the leading role of intellectual property judicial protection has
become increasingly apparent, effectively playing the role of protecting intellectual
property rights and stimulating innovation, so that China’s intellectual property
innovation environment has been well optimized.
International IP Disputes
The higher the output of the industry, the more urgent the requirements for intellectual
property protection strategies will be (Wang, 2016). Especially in the high-tech
industry, there are many scientific and technological innovations involved, so the
requirements for the intellectual property protection strategy are particularly urgent,
which can be seen from several typical projects in the overseas aid of intellectual
property rights launched by Beijing in recent years.
First, Xiaomi Company was sued by Ericsson in India for patent infringement
case. In 2014, shortly after the launch of Xiaomi’s mobile phone products in India,
Ericsson suddenly launched a patent complaint, claiming that Xiaomi infringed
on eight patents. At the request of Ericsson, the Indian court issued a “pre-suit
forbidden sale order” to Xiaomi. After Xiaomi’s appeal, the court only agreed to sell
Xiaomi mobile phones equipped with Qualcomm chips in India, but each mobile
phone still needs to pay deposits, while another product equipped with MediaTek
chips is still banned to sell. Second, Beijing GUODIANFUTONG SCIENCE AND
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DEVELOPMENT Co., Ltd was sued in Italy by the Italian company MAGALDI
for patent infringement. In 2009, Beijing GUODIANFUTONG SCIENCE AND
DEVELOPMENT Co., Ltd. filed an infringement lawsuit against MAGALDI in
India for violating its Indian patents when bidding for a thermal power project
in India, demanding that the court issue a temporary injunction prohibiting all
violations of GUODIANFUTONG in India; Third, TONGFANGWEISHI Company
in Malaysia sued local company named PAT for patent infringement. In 2013, Beijing
TONGFANGWEISHI Technology Co., Ltd. discovered that two sets of scanning
equipment purchased by PAT from a company in Beijing and sold to Malaysia
Customs infringed the patents shared by Tongfang and Tsinghua University in
Malaysia. After more than one year of trial, the court’s decision basically supported
all the claims of TONGFANGWEISHI. However, the follow-up defendant and the
third party were dissatisfied with the result of the defeat and appealed separately.
With the gradual high-end export of the industry in the construction of belt and
road initiative, similar intellectual property disputes will become more and more
frequent. Therefore, breaking the predicament of the intellectual property system
and raising the requirements for the intellectual property strategy have become the
premise and guarantee for the smooth progress of the construction of belt and road
initiative.
DIFFERENCES IN INTELLECTUAL PROPERTY

SYSTEMS AMONG COUNTRIES
65 countries and regions were involved in the implementation of the belt and road
initiative, and the intellectual property protection systems of different countries are
not the same. We can find out lots of reasons, but there are mainly three reasons:
different organizations of IP, different international treaties and legal systems. It is
precisely because of these differences that some countries such as India, Russia,
Singapore and other intellectual property rights protection levels are relatively high,
and some countries have very weak intellectual property systems, which makes the
phenomenon that the level of intellectual property protection among these countries
were polarized.
Different Organizations of IP
Countries with high levels of intellectual property protection actively use their own
advantages to promote the integration of intellectual property rights. For the time
being, there are three main intellectual property organizations involved in the belt and
road initiative, included the ASEAN Intellectual Property Cooperation Organization,
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Eurasian Patent Organization and European Patent Organization. Different IP

organizations, different background, different questions that they concerned, making
the phenomenon that collisions and contradictions are inevitable. The formation of
this three-legged situation has also created obstacles to the formation of a unified
intellectual property system along the belt and road initiative (Zhang, Wang & Li,
2015).
ASEAN Intellectual Property Cooperation Organization
The ASEAN Intellectual Property Cooperation Organization is a regional intellectual

property cooperation platform of the Association of Southeast Asian Nations,
covering 630 million people in Southeast Asia. It aims to foster a good intellectual
property environment, establish an integrated ASEAN intellectual property system,
and promote economic development in Southeast Asia. In 1995, ASEAN countries
formulated the Intellectual Property Cooperation Framework Agreement, which
made the cooperation of ASEAN countries in the field of intellectual property from
theory to reality. After that, ASEAN countries successively formulated the 2004-2010
ASEAN IP Action Plan and 2011-2015 ASEAN IP Action Plan. Under the guidance
of the action plan, ASEAN countries actively took measures to coordinate national
IP development strategies and promote ASEAN. The integration of intellectual
property rights and the strengthening of international cooperation and exchanges
in intellectual property rights have significantly improved the ASEAN intellectual
property environment (Wang, 2016).
As early as 2004, China signed the Action Plan for the Implementation of the
China-ASEAN Joint Declaration on Strategic Partnership for Peace and Prosperity
(2005-2010) with ASEAN, and signed the Memorandum of Understanding on
China-ASEAN Intellectual Property Cooperation in 2009. These two files made
a very solid foundation for the cooperation between the two sides in the field of
intellectual property.
Eurasian Patent Organization
The purpose of establishing the Eurasian Patent Organization is to solve the

problems left in the patent field between the CIS countries after the disintegration
of the Soviet Union. It aims to establish a unified Eurasian patent system and be
responsible for the application, review, authorization and management of patents
in each member state. In 1995, the Eurasian Patent Office began to operate. After
the patent application submitted by the Eurasian Patent Office has been examined
and found it meet the authorization conditions, the Eurasian patent right can be
obtained, and the Eurasian patent right has uniform effect on each member state.
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The establishment of Eurasian patents unifies the effectiveness of each member

state in patent application, approval and authorization.
In 2010, the Eurasian Patent Office led a delegation to visit the State Intellectual
Property Office of China for the first time. The two sides conducted in-depth
discussions on the future direction of cooperation and laid the good foundation for
the long-term cooperation between the two offices.
European Patent Organization
The European Patent Organization was born in 1977, it aims to strengthen the
cooperation of intellectual property protection among the member states. The
European Patent Organization has an Administrative Commission and the European
Patent Office. The function of the European Patent Office is to be responsible
for the examination, approval and authorization of European patent applications
submitted by member states. After a patent application filed by a member state
with the European Patent Office under the European Patent Convention is granted a
patent right, it can be entered into force in all designated countries, and is equivalent
to the patents granted by the designated countries in accordance with the national
patent law. The establishment of the European patent system has improved the
efficiency of patent examination and approval, and unified the standards for patent
examination and approval, which is conducive to promoting the growth of intellectual
property protection in member states. Since the European patent system only can be
applied to the approval stage of patents, and pay litter attention to the maintenance
and protection of European patents in the designated countries, which leads to the
lack of legal certainty in European patents. In order to solve the legal certainty of
European patents, the European Patent Organization established a European single
patent system. The European single patent system is characterized by a European
patent application authorized by the European Patent Office, and according to the
application of the right holder, it provides uniform protection and uniformity in the
member states that participated in the framework of the single patent protection
system, thereby fundamentally solving the legal certainty issues of European patent.
In 2011, the bilateral meeting between the Chinese Patent Office (SIPO) and
the EPO, held in Chongqing (South West China) last week, was further testimony
to the long and fruitful relationship, both of offices have now enjoyed for many
years. China and Europe, SIPO and the EPO already became strategic partners in
the patent field.
The common point of the above three intellectual property organizations is
the purpose that to solve the problem of intellectual property rights in the region,
thereby promoting the development of the intellectual property system in the region.
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Therefore, the patent systems formulated by different organizations have relatively

lots of limitations. They may be targeted at resolution of intellectual property
issues in the region and relatively efficient, but it is not conducive to the effective
integration of patent systems within and outside the region, which may lead to
conflicts in various patent systems. For example, contradictions that happened among
regional organizations, between member states and regional organizations, or among
member states. The differences among the three organizations are the background
of their establishment and the level of intellectual property protection, and the point
that they focus on, which has clearly become a hindrance to regional cooperation.
Fortunately, China has established a good cooperation relationship with the above
three patent cooperation organizations, made full use of the coordination role in the
intellectual property protection, and helped solve the contradictions among different
countries, all of these helped establish a kind of universal and fair atmosphere. And
this kind of intellectual property system that concentrates the advantages of each
organization is the key to realizing the protection of overseas intellectual property
rights of the belt and road initiative.
Different International Treaties
International treaties refer to written agreements between the subjects of international

law governing their rights and obligations under international law. The international
intellectual property system was established through the 1883 Paris Convention and
the 1886 Berne Convention. The main international treaties that countries along
the Belt and Road initiative involved, included, the Convention establishing the
World Intellectual Property Organization, the Paris Convention for the Protection of
Industrial Property, the Berne Convention for the Protection of Literary and Artistic
Works, the Patent Cooperation Treaty, the Patent Law Treaty and the Agreement of
establishing the World Trade Organization.
The Convention Establishing the World

Intellectual Property Organization
The WIPO Convention, which was formed by the World Intellectual Property
Organization (WIPO), was signed in Stockholm on July 14, 1967, entered into force
in 1970, and was amended in 1979. WIPO is an intergovernmental organization that
became a specialized agency in the United Nations system in 1974. WIPO has two
main objectives, one is to promote the protection of intellectual property in the terms
of world, and the other is to ensure administrative cooperation between intellectual
property alliances established by WIPO-administered treaties.
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Paris Convention for the Protection of Industrial Property
The Paris Convention for the Protection of Industrial Property (referred to as the
Paris Convention) was signed in Paris on March 20, 1883 and entered into force on
July 7, 1884. The object of adjustment of the Paris Convention is industrial property
rights, including invention patents, utility models, industrial designs, trademarks,
service marks, manufacturer names, goods marks or appellations of origin, and the
suppression of unfair competition, and so on. The basic purpose of Paris Convention
is to ensure that the industrial property rights of a member state are protected in all
other member states. On March 19, 1985, China became a member of the Convention.
Berne Convention for the Protection of Literary and Artistic Works
The Convention came into being on September 9, 1886 and it is the first international
copyright convention in the world, and established an international standard for
the protection of copyright that is acceptable to most countries. The Convention
is administered by the World Intellectual Property Organization. The Convention
was signed by 10 countries, including the United Kingdom, France and Germany. It
came into effect in 1887 and was revised and supplemented seven times. By 1999,
the number of countries and regions participating in the Convention reached 136. In
October 1992, the Convention entered into force for China. The current text of the
Convention is a revised text in Paris in 1971. It mainly regulates the basic principles of
international copyright protection, the scope of protected works, minimum standards
of protection, and limited special treatment for developing countries.
Patent Cooperation Treaty
The Patent Cooperation Treaty (referred to as the PCT) is the most important
international treaty in the field of patents after the Paris Convention for the Protection
of Industrial Property. It was signed by 35 countries in Washington on June 19, 1970.
And China officially became the member States of the Patent Cooperation Treaty
is on January 1, 1994.The Patent Cooperation Treaty provides an internationally
uniform standard for the acceptance and examination of patent applications. Within
the scope of a member state, applicants are required to submit an international
application in one country in a prescribed language, and specify the patent in the
application. The protected countries have the effect of submitting national patent
applications to countries respectively. The application procedures stipulated by the
treaty and simplify the procedures for applicants to apply for patents in multiple
countries for the same invention, and also reduce the duplication of work of national
patent offices.
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Patent Law Treaty
On May 11, 2000, the Diplomatic Conference for the Adoption of the Patent Law
Treaty was held in Geneva, and the General Assembly adopted the Patent Law
Treaty by consensus. China and other 103 states and three intergovernmental
international organizations, the European Patent Office, the Eurasian Patent Office
and the African Regional Industrial Property Organization, signed the final text
of the Diplomatic Conference. On April 28, 2005, the Patent Law Treaty entered
into force. The purpose of the Patent Law Treaty is to streamline and harmonize
the procedural requirements of national and regional patent offices for filing and
accepting national and regional patent applications, thereby reducing the burden on
applicants, simplifying the procedures of patent offices, and avoiding unnecessary
duplication of work.
Agreement of Establishing the World Trade Organization
The Uruguay Round Ministerial Conference of the GATT, held in Marrakesh,

Morocco, on April 15, 1994, decided to establish a global World Trade Organization
(WTO) to replace the GATT, which was established in 1947 (GATT). The WTO
is a permanent international organization independent of the United Nations. The
basic principle and purpose of the organization is to achieve the goal of promoting
world trade liberalization by implementing the principles of market openness, non-
discrimination and fair trade. It officially began to operate on January 1, 1995, and
is responsible for managing the world economy and trade order. It is headquartered
in the GATT headquarters building which is beside the Lake Geneva in Geneva. On
January 1, 1996, it officially replaced the GATT Provisional Institution. Compared
with the GATT, the scope of WTO jurisdiction in addition to the traditional trade
agreement with the Uruguay Round, also included, intellectual property rights,
investment measures and non-goods trade (service trade) that are long-term outside
the GATT. The WTO has legal status and it is more authoritative and effective in
mediating disputes among member states. On November 11, 2001, Doha, the capital
of Qatar, officially signed an agreement on China’s accession to the World Trade
Organization (WTO). One month later, China officially became a member of the
WTO and integrated into the world’s multilateral trading system.
As can be seen from Figure 3, among the 65 countries that along the belt and road
initiative, although there are only 24 member states of the Patent Law Treaty, the
number of other member states of convention exceed two-thirds of the total number.
In particular, the number of member states of the Convention on the Establishment
of the World Intellectual Property Organization has reached 64. Therefore, although
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Figure 3. The number of members of international treaties
there are many differences in the member states of international treaties, in general,
it is very optimistic, which will certainly provide tremendous help for the formation
of a unified intellectual property system along the belt and road initiative.
Different Legal Systems
The legal system is the concept used in the comparative law to divide various
laws, and refers to the sum of the legal systems of the same or similar traditions,
principles, systems, and characteristics. Generally speaking, the legal system in the
world can be divided into the common law, the European legal system, the Chinese
legal system, the Nordic legal system, the Far East legal system, the socialist legal
system, the Islamic legal system, and the Indian legal system. The countries that
along the belt and road initiative involves the Common Law, the Civil Law, the
Socialist Law, the Islamic Legal System, and the Mixed Legal System. Different
legal systems mean that one country may has its own particular systems or rules,
and so on. For example, in the intellectual property system, there are differences in
the Author’s Rights and copyright between the Common Law and Civil Law, from
emphasizing the author’s rights to emphasizing the author’s moral rights, the Civil
Law gives a basic feature of the meaning to the author’s right; while the Common
Law pays more attention to the author’s property rights and gives it the meaning of
copyright (Zheng, 2003).
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Common Law
The Common Law is also known as the Anglo-American Legal System, the British
Legal System, and the Case Law. A general term for laws developed on the basis
of English common law. It refers to the unique legal system gradually formed
by the United Kingdom from the 11th century on the basis of the common law
derived from Germanic customary law and the legal system of other countries and
regions emulating the United Kingdom. It originated in the United Kingdom and
later expanded to many countries and regions that were once British colonies and
affiliated countries, including the United States, Canada, India, Pakistan, Bangladesh,
Malaysia, Singapore, Australia, New Zealand and individual countries and regions
in Africa. It is a long-standing and influential legal system in the Western countries
that is juxtaposed with the civil law system. It focuses on the continuity of the code,
and based on traditions, jurisprudence and customs (Lu, 2013).
Civil Law
The Civil Law refers to the laws of the European continent that originated from the
Roman law and represented by the 1804 French Civil Code. Therefore, the Civil Law
is also called the Roman Legal System. In 1896, Germany formulated the German
Civil Code which based on the French Civil Code. After the Code was followed
by some countries, the Civil Law was also known as the Roman-German Legal
System. In addition to France and Germany, there are laws in Austria, Belgium,
the Netherlands, Italy, Switzerland, Spain, Japan that after the Meiji Restoration,
and some French-speaking countries or regions in Asia, Africa and Latin America
(Wu, 2013).
Socialist Law
Socialist Law or Soviet Law denotes a general type of legal system which has been
used in socialist and formerly socialist states. It is based on the civil law system,
with major modifications and additions from Marxist-Leninist ideology. There is
controversy as to whether socialist law ever constituted a separate legal system or
not (Quigley, 1989).
Islamic Legal System
The Islamic Legal System also known as the Arabic Legal System. A general term
for the laws of the Arab countries and other Muslim countries that believe in Islam
in the Middle Ages. The main content is the Qur’an and the Sunnah (Muhammad’s
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words and deeds). During the heyday of the Arab Empire in the 8th and 9th centuries,
Islamic law also flourished, from the Indus Valley in the east to the Atlantic
Ocean in the west, and Islamic law in countries ranging from the Himalayas to the
Mediterranean shore. Following the collapse of the Arab Empire, the influence
gradually weakened. To the present, with the development of capitalism and social
change in Muslim countries, secular law has largely replaced Islamic law in most
countries. However, since Islam is still one of the dominant ideologies, Islamic
law still has different degrees of binding on Muslim behavior in various Muslim
countries, and it is a legal system with considerable influence (Zou, 1991).
Mixed Legal System
The Mixed Legal System is a combination that some of the above legal systems.
It can be seen from the Figure 4 that the countries along the belt and road initiative
are mainly Civil Law countries and Mixed Legal System countries, accounting for
54% and 34% respectively. Although there are still differences in the legal system, as
long as the countries along the route strengthen intellectual property communication
and solve the conflicts caused by these differences in time, it is also possible to form
a unified intellectual property system along the belt and road initiative.
Different National Intellectual Property Legal System
Intellectual property rights refers to the rights that people enjoy the fruits of
certain intellectual activities, which are monopolistic and exclusive. According
to the Agreement on Trade-Related Aspects of Intellectual Property Rights, there
are seven categories of the intellectual property rights will be protected, including
Copyright or Author’s Rights, Trademark, Patent, Geographical Identification,
Design of Exterior, Design of Integrated Circuit Layout, Undisclosed Materials or
Trade Secrets (Li, 2008). There are many differences in the intellectual property
legal system of countries along the belt and road initiative. This paper will take the
Copyright and Trademark as examples.
Different Periods of Copyright Protection
Copyright is composed of the author’s moral rights and economic rights. Moral
rights refer to the rights of the author in respect of the personality or spirit embodied
in the work. It is generally believed that the author’s moral rights consist of four
parts, namely, the right to publish, the right to authorize, the right to protect the
integrity of the work, and the right to withdraw the work; the economic rights of
copyright, also known as property rights in Chinese Copyright Law, refer to the
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Figure 4. Proportion of legal systems of countries along the belt and road initiative
author or the right of other copyright owners to use the work and obtain economic
benefits. Generally speaking, economic rights of copyright can be divided into three
categories, namely, the right of reproduction, the right of deduction, and the right
of public communication.
Countries along the belt and road initiative have different periods of copyright
protection. On the one hand, there are two theories of “monism” and “dualism” in
the period of copyright protection. According to the theory of “Monism”, the moral
rights and economic rights produced by the creation of works are an inseparable unity.
According to the theory of “dualism”, the economic and moral rights generated by
the creation of works are separated from each other. Among the civil law countries,
Germany and France are typical examples of “monism” and “dualism”. According
to the French Copyright Law, the period of protection of economic rights is 70
years plus the author’s lifetime, or 70 years after the last author die in the case of a
cooperative work. The protection of moral rights has no time limit and is inherited
by the descendants of the author. According to Germany’s “Monism”, the protection
period of its moral rights is the same as the protection period of economic rights,
that is, the author’s lifetime plus 70 years.
The Chinese Copyright Law is close to the French “dualism” in the period of
copyright protection, that is, the period of economic rights protection is the author’s
lifetime plus 50 years, and there is no limit of time for the protection of moral rights,
the right to authorship, the right to modify and the right to protect the integrity of
works, but the protection period for publication rights is 50 years plus the author’s
lifetime. This is really different. In addition, as can be seen from Figure 4, more than
half of the countries along the belt and road initiative are civil law countries. It is
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conceivable that the number of countries with different copyright protection periods
is big. On the other hand, the length of time copyright protection of countries along
the belt and road initiative is also different. China is the author’s lifetime plus 50
years. The Czech Republic is the author’s lifetime plus 70 years. India is the author’s
lifetime plus 60 years, while Egypt is the author’s lifetime plus 50 years, and so on.
Different Ways to Obtain Trademark
Trademark is a mark that distinguishes the goods or services provided by a producer

from the same goods or services provided by other producers. Trademark rights are
the rights of producers and operators to their trademarks. On the one hand, in the
civil law system, trademark rights are usually obtained through registration, while
in the Anglo-American legal system, they are mainly obtained through use. It can
be seen from Figure 4, the countries along the belt and road initiative are basically
the common law and civil law countries, it means that the number of countries along
the route have different ways to obtain trademark is large.
On the other hand, even if the same way to obtain trademark that is through
registration, this is still very different. Whether a mark can be registered as a trademark
in a country along the route depends on the definition of the trademark which is
very different in different countries. Such as, according to the China Trademark
Law, any sign that can distinguishes goods of natural persons, legal persons or other
organizations from those of others, including words, figures, letters, numbers, three-
dimensional signs, color combinations and sounds, and combinations of the above
elements, can be used as trademark. According to the Czech Republic Trademark
Law, any logo that identifies a company’s goods or services and other companies’
goods and services and can be written or plotted, including text, personal name,
design style, letters, numbers, colors, shape or package of the goods, can be used
as trademark. According to the India Trademark Law, any mark that can identifies
a product or service of a company and that is expressible or can be written down,
including the shape or package of goods and combination of color, can be used as
trademark.
THE ISSUES AND CHALLENGES OF CHINA’S

INTELLECTUAL PROPERTY PROTECTION
The belt and road initiative is a strategy of going out to the world, and going out
will inevitably face various problems and risks. The sources of the problem mainly
include the enterprise itself and government of China, and the risks come from
countries along the route and traditional developed countries.
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Enterprises of China
At present, there are two main problems in the intellectual property strategy of
Chinese enterprises. On the one hand, enterprises paid insufficient attention to
intellectual property rights; on the other hand, the independent innovation capability
of enterprises is insufficient. No matter which one is very deadly, it can be said that
Chinese enterprises must attach importance to and solve them if they want to catch
up with the belt and road initiative and achieve long-term development.
Enterprises Pay Insufficient Attention to Intellectual Property Rights
Subjectively, enterprises in the domestic environment do not pay enough attention

to intellectual property rights and lack awareness of the intellectual property layout
overseas. Objectively, the national patent system and intellectual property protection
level along the belt and road initiative far apart. At the same time, countries are also
affiliated with different regional patent organizations, which also brings difficulties
for Chinese enterprises to carry out patent layout and formulate intellectual property
protection strategies. From the patent data from 2011 to May 2016, Chinese
companies have only obtained patent licenses in more than a dozen countries along
the belt and road initiative, including Russia, India, Singapore, Malaysia and other
countries. There are few patent applications in Eastern Europe, West Asia and
Central Asia. Even in countries where there are already patent applications, the
number of applications and the number of grants is small, which is not enough to
form an effective patent layout.
Insufficient Capacity of Independent Innovation
At present, China is moving from “Made in China” to “Created in China”. The

ability of independent innovation is a key factor in the core competitiveness of
enterprises and even the whole country. However, from a realistic point of view, the
ability of independent innovation of Chinese enterprises is obviously insufficient.
In terms of internal factors, in recent years, Chinese enterprises have invested more
and more in R&D expenditures. However, it can be seen from the distribution of
expenditures that only a small part of the funds are spent on basic research, and most
of the expenses are in updating equipment. In terms of hardware investment, the
proportion of funds invested in technology research and development is not high.
From the external factors, the innovation power of many enterprises in China now
comes from the market-driven, market demand is contingent, and the innovation
brought by it is not only passive but also poor in continuity, which leads to a large
number of intermediate products technology and products still depends on imports.
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At the dawn of the sixth scientific and technological revolution in the world, the
lack of independent innovation capability makes it difficult to grasp the latest
developments in technology development and cannot respond to market demands
in a timely manner. In the long run, if we want to take the lead in the process of
building the belt and road initiative and remain invincible, we must fundamentally
strengthen our ability to innovate independently.
Government of China
There are two main problems in the Chinese government’s intellectual property
strategy, on the one hand, the intellectual property public services provided by
government are not in place; on the other hand, the intellectual property service
agencies lack experience in docking countries along the belt and road initiative. The
development of Chinese enterprises is inseparable from the government’s policy
support, and a good government policy environment is more conducive to the rapid
development of enterprises (Chen, 2007).
The Intellectual Property Public Services are not in Place
For a long time, the administrative departments of intellectual property at all levels
have placed more public resources on the creation, use and protection of domestic
patents, and insufficient support for overseas development of enterprises. In the patent
application, the funding for domestic patent applications is relatively strong at this
stage, and the funding for international patent applications is obviously insufficient.
On the other hand, due to the high cost of international patents, it also leads to
the enthusiasm of enterprises for their lack of overseas patent applications. In the
acquisition of patent information, because there is no corresponding government
information platform, it is difficult for enterprises to obtain sufficient patent
information in the first time after the occurrence of international intellectual property
disputes, and it is impossible to respond quickly. In recent years, the administrative
departments of intellectual property at all levels have done a lot of work in supporting
enterprises to “going out” in terms of early warning and safeguarding rights assistance.
But limited by funds and other aspects, the effect is not obvious. For example, the
enterprises in responding to overseas intellectual property disputes is still limited.
Lack of Experience in Docking Countries Along the Route
China’s IP service institutions have a good momentum of development in terms of

quantity and scale, but there is a lack of understanding of the complex geopolitics and
different economic conditions of countries along the belt and road initiative. Most of
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China’s service organizations mainly stay in single areas. Such as, the agent of patent
application, registration of trademark, copyright, and integrated circuit design and
registration. They lack experience in conducting high-end comprehensive services
such as risk warning, overseas rights protection, and strategic consulting. Also, due
to not well understand the political system and the intellectual property system of
countries along the belt and road initiative, resulting in a weak international vision
and it is difficult to provide effective assistance.
Countries Along the Route and Traditional

Developed Countries
Countries along the route and traditional developed countries are both partners and
opponents to China. In particular, the latter will more likely to be an opponent to
China. The risks they may bring can be divided into two aspects. On the one hand,
the attitude of scientific and technological cooperation with China is complicated; on
the other hand, the existence of issues such as politics, legal system, and discourse
power.
The Attitude of Cooperation With China is Complicated
In the process of implementation of the belt and road initiative, the attitude of
science and technology cooperation between countries along the route and China
is negatively correlated with their comprehensive strength. The countries that have
positive attitudes toward China’s scientific and technological cooperation include
Mongolia, Myanmar, Thailand, Pakistan, Kazakhstan, etc. These countries generally
welcome the belt and road initiative and are more active towards scientific and
technological cooperation; countries with strong comprehensive strengths, such as,
Russia, India and Korea, have a vague attitude toward the belt and road initiative.
They want to share the benefits of the initiative, and they always maintain a certain
vigilance, showing a vague attitude toward cooperation, more political statements
and slow action; some countries in Africa and the Middle East are politically unstable
and have a wait-and-see attitude and skepticism about the belt and road initiative.
At the same time, countries with a number of technology exporting, such as, the
United States and Japan, have a cold attitude towards cooperation with China and
to some extent resist cooperation. Hence, the patent layout along the route of those
countries will inevitably restrict and affect the development of China’s patent layout
and cooperation with other countries. The main risk of “going out” may brought
is that the major countries that along the route are not active in cooperation, even
worse, hinder joint action and weaken cooperation revenue.
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Political, Legal System, and Discourse Power Issues
Based on the belt and road initiative, according to the development needs of China’s
patent internationalization, it is necessary to establish an international protection
system such as the intellectual property community. However, due to differences
in laws, regulations, technologies, and standard forms, China faces three major
difficulties. Firstly, policy and legal risks of regional intellectual property rights. On
the one hand, there are risks of political instability in the Middle East and Africa along
the belt and road initiative, which will affect the coherence of intellectual property
policies and economic and trade relations. On the other hand, Chinese enterprises
have legal risks in overseas intellectual property rights and are more likely to fall
into the dispute of infringement and rights protection; Second, differences in the
regional intellectual property system. The economic zone of Belt and Road initiative
covers three major regions of Asia, Europe and Africa. Countries in each region
have great differences in intellectual property-related industries, laws, values, and
culture. Last but not least, there is a lack of regional intellectual property rights, and
the national science and technology systems vary greatly along the route. The belt
and road initiative involves the formation and construction of regional intellectual
property rules, while developing countries including China face challenges arising
from the lack of experience due to dealing with the technological differences and
reducing transaction costs.
COUNTERMEASURES
The proposal of the belt and road initiative is not only an international strategy
advocated by the Chinese government for cooperative development, but also a
local strategy for the new normal of economic development and innovation. Under
the guidance of the belt and road initiative, China needs to actively promote the
international strategy for the creation of a regional system for intellectual property
rights, as well as the domestic strategy for the continuous development of intellectual
property rights. Based on a comprehensive analysis of the domestic and international
intellectual property environment, the following suggestions of the intellectual
property protection strategy under the belt and road initiative from the domestic
and international levels.
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Domestic Strategy
In order to improve the influence of China in the technical field along the belt
and road initiative as soon as possible, and win the competitive advantage of the
international market for enterprises, reduce the international intellectual property
disputes that may be encountered in the process of “going out”, and reduce the
external impact brought by the lock-up of a few technical fields, the following work
should be carried out as soon as possible.
Strengthen Intergovernmental Cooperation
The fundamental function of the intellectual property system is to promote economic

development, and a good international cooperation mechanism for intellectual
property rights is the basic guarantee for realizing this function. On the one hand,
it is necessary to strengthen communication between China and the intellectual
property management institutions of various countries, establish an intellectual
property communication mechanism with countries along the belt and road
initiative, and promote various activities. Such as, promoting bilateral or multilateral
cooperation, signing the intellectual property memorandums, and so on. Establishing
an environment for intellectual property protection for peaceful coexistence and
common development. On the other hand, it is necessary to strengthen cooperation
with relevant intellectual property organizations and trade zones such as the ASEAN
Intellectual Property Cooperation Organization, the Eurasian Patent Organization,
the European Patent Organization and the Gulf Cooperation Council, and accelerate
the signing of cooperation treaties or agreements. Form a mutual assistance system
and promote international review cooperation.
Provide With Strong Public Service for Enterprises
Establish a comprehensive information platform of the belt and road initiative and
intellectual property protection, and encourage the social forces to participate in
the construction, maintenance and use of the platform, to provide enterprises with
the most timely and effective dynamic tracking of intellectual property rights in
various countries and industries, and to enhance the convenience of enterprises to
obtain intellectual property information in target countries. Strengthen overseas
intellectual property risk warning and rights protection assistance, formulate
national guidelines on trade investigation and risk prevention and control related to
intellectual property rights, and provide timely and effective intellectual property
layout recommendations for enterprises. Exploring the establishment of special
funds to support enterprises in the whole chain of early warning analysis, patent
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application, and rights protection assistance. Playing active role of being a bridge
between various associations, chambers of commerce and associations, and introduce
international advanced intellectual property management experience into the
country, use intellectual property as a link to deepen understanding and trust among
enterprises, and create a good atmosphere of common development of enterprises
in various industrial chains.
Enhance the Independent Innovation Capability of Enterprises
Creating a good policy environment and effective incentive mechanism to protect

and encourage inventors and scientific and technological personnel to engage in
creative activities, and creating good conditions for researchers to carry out research,
invention and technological breakthroughs, and promoting enterprises to enhance
their independent innovation capabilities. Increasing publicity, strengthen corporate
intellectual property awareness, change the wrong impression that enterprises apply
for patents, registered trademarks, etc. as a means of get rewards and benefits, and
enhancing awareness of enterprises of the legal meaning and rights behind the
patents and trademarks. While enterprises are making strategic plans for intellectual
property rights in developed countries in Europe and America, strengthen their
awareness and emphasis on the layout of intellectual property rights in countries
along the belt and road initiative.
International Strategy
The intellectual property protection under the belt and road initiative facing with many
risks, especially in developed countries, which highlights the trend of constructing
a new international economic and trade order, weakening the influence of the
original World Trade Organization and the Agreement on Trade-Related Aspects
of Intellectual Property Rights. To this end, China should advocate the countries
that along the belt and road initiative to commit themselves to the construction of a
regional intellectual property legal order, and establish a community of intellectual
property laws and institutional guarantees as an important supplement and adjustment
of the international intellectual property protection system (Yuan, 2014).
Build a Regional Intellectual Property Integration System
The implementation of the belt and road initiative is accompanied by the promotion
of regional intellectual property integration. Reasonable regional intellectual property
integration rules should be well integrated with international intellectual property
rules. On the basis of meeting the minimum international protection standards for
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intellectual property rights, it is also possible to implement differentiated protection

according to the differences in the level of intellectual property protection among
countries in the region, so as to achieve mutual benefit and win-win for intellectual
property protection among countries in the region. To construct a reasonable
regional intellectual property integration rule, we need to consider the differences
in the intellectual property status of each country, adhere to the principle of mutual
respect, mutual assistance, cooperation and win-win, and allow different countries to
implement different protection strategies to ensure fair and reasonable rules. At the
same time, it is necessary to fully study the conflicts and contradictions between the
international intellectual property system and regional rules, to avoid the phenomenon
of closed doors in the region, to keep pace with the times, actively integrate into
the international intellectual property system, and to make good foundation for the
region’s intellectual property achievements come into the world.
Make a Good Patent Layout Along the Belt and Road Initiative
Patent layout is an effective means for enterprises to occupy the technology market,
suppress competitors, and defend against patent infringement. Do a good job in
patent intelligence analysis, fully exploit the industry information hidden behind
patent data, and use patent navigation to make patent layout is the important weapon
to enterprise in the technology market to win.
The layout of patents is usually divided into three categories: patent area layout,
patent industry layout and patent overseas layout. Different types of patent layouts
focus on different points. The patent area layout focuses on the advantages of
regional resources, targeted patent layout, and promotes the rapid development of
the regional economy. The layout of the patent industry focuses on the development
planning of the entire industrial chain, focusing on the development of advantageous
industries and maintaining the leading position of advantageous industries. The
overseas layout of patents focuses on the competition and expansion of enterprises
overseas, and provides protection for enterprises to occupy the market overseas and
prevent infringement.
Under the belt and road initiative, we plan the distribution of patents in line with
China’s national conditions, promote the development of the central and western
regions through the domestic regional patent layout, promote the professional
upgrading of traditional industries and the development of strategic emerging
industries through the industrial layout, and lead the overseas layout. The approval of
the dominant enterprises in the belt and road initiative overseas business competition,
striving for world-renowned enterprises, and promoting enterprises to take the
initiative and the right to speak in the global market. All of those are very important
for establishing China’s leading position in the belt and road initiative.
104
Enhance the Communication of Intellectual

Property Between Countries
Through the communication of intellectual property, countries along the belt and
road initiative can enhance the mutual understanding between countries along the
route, conflicts of intellectual property can be coordinated, and losses caused by
intellectual property conflicts can be reduced. The two or more parties communicate
with each other can handle intellectual property friction by signing a memorandum
of understanding, establish a good environment that mutual respect and peaceful
coexistence, jointly safeguard the achievements of regional intellectual property
protection, and promote the development of intellectual property rights.
CONCLUSION
This paper introduces the basic connotation of the belt and road initiative, and
analyzes the intellectual property environment from the view of domestic and abroad.
Although the environment of domestic intellectual property has not yet reached the
optimal status, the trend of continuous optimization has laid good foundation for the
formulation of the intellectual property protection strategy of belt and road initiative.
And the complexity of the international intellectual property environment along
the belt and road initiative indicates that building a fair and universal intellectual
property system is the key to realize the intellectual property protection of belt
and road initiative. On the basis of comprehensive analysis of the environment of
domestic and international intellectual property, the paper analyzes the intellectual
property protection strategy under the belt and road initiative from both domestic and
international levels. In terms of domestic, we should strengthen intergovernmental
cooperation, provide with strong public service for enterprises, and enterprises
should enhance the capability of independent innovation; in terms of international,
we should build a regional intellectual property integration system, make a good
patent layout along the belt and road initiative, and strengthen the communication
of intellectual property between countries. Hope these can provide reference for
intellectual property research under the belt and road initiative.
105
REFERENCES
Chen. (2007). Globalization, Regional Integration and Localization of Intellectual

Property Law: Problems, Doctrines and Methods. Journal of Guangxi Normal
University: Philosophy and Social Sciences, 43(6), 134.
Hong, W. (2016). The Cooperation between the Belt and Road Initiative and Strategic
of Protection Intellectual Property. Front Journal, 10, 20.
Li. (2008). Intellectual Property Law. Beijing: Law Press China.
Lu. (2013). Dictionary of Management. Shanghai: Lexicographical Publishing House.
Quigley, J. (1989). Socialist Law and the Civil Law Tradition. The American Journal
of Comparative Law, 37(4), 781.
Wu, Z. (2013). Legal concept. Beijing: Law Press China.
Yu, Z. (1991). Law Dictionary. Beijing: China University of Political Science &
Law Press.
Yuan. (2014). National Strategy Analysis of the Belt and Road Initiative. Theoretical
Monthly, 11, 6.
Ze, W. (2006). Association of Southeast Asian Nations. Beijing: China Legal
Publishing House.
Zhang, Z., Wang, L., & Shan, L. (2015). Strategic of Protection Intellectual Property
under the Belt and Road Initiative. Chinese Invention and Patent, 6, 30.
Zheng, S. (2003). Intellectual Property Law. Beijing: Law Press China.
106
Section 2
Industrial and Trade
Development Studies
Under the Belt and Road
Strategy
108
Chapter 7
An Assessment of the Belt
and Road Performance:
Based on the Case of Machinery
Shipment From Shanghai to Rotterdam
Sedat Baştuğ
https://orcid.org/0000-0002-7121-2882
Iskenderun Technical University, Turkey
Turgay Battal
https://orcid.org/0000-0002-0710-4692
Iskenderun Technical University, Turkey
ABSTRACT
The aim of the chapter is to propose a methodology to illustrate the cost and time
components of door-to-door movement by One Belt and One Road (OBOR) and
traditional routes alongside with modes. The study is concentrated on a case study
and uses established multimodal transport cost model as a research framework.
Interviews with industry practitioners and observation from primary methods
of data collection. The use of multimodal transport cost model is common in the
containerized cargoes. Hence, this study provides an original analysis for OBOR
initiative. The volumes of OBOR shipments are large, with a high value-to-volume
ratio. The research initially confirms that multimodal transport alternatives and
modal combinations may successfully be applied and assess the performance of
OBOR initiative.
DOI: 10.4018/978-1-5225-8440-7.ch007
An Assessment of the Belt and Road Performance
INTRODUCTION
Globalization and trade liberalization have benefitted China by making it the world’s
largest manufacturing center and the country has emerged as an engine of Asian
economic growth (McGregor, 2006). This phenomenon made China has grown to
the largest manufacturing and trading country in the world. However, in recent years,
China has faced a slowdown of its domestic economy that has affected global and
inter-regional trade (Timmer et al., 2016).
More than 2,000 years ago, China’s imperial envoy Zhang Qian helped to establish
the Silk Road, a network of trade routes that linked China to Central Asia, Middle
East and Europe. The name came from one of China’s most important exports silk.
And the road itself influenced the development of the entire region for hundreds
of years (Jinchen, 2016:1). In 2013, president, Xi Jinping proposed establishing
the new regional cooperation model and called Silk Road Economic Belt. This
proposal contains new maritime silk roads, new railways network, roads, pipelines
and utilities that would connected to China, Central Asia, West Asia, parts of South
Asia and Europe. The geographical coverage of which is illustrated in Figure 1.
This proposal is officially called as the One Belt, One Road initiative (OBOR) or
the Belt and Road initiative.
This plan connects China with its neighbors in Asia and beyond, involving
more than 60 countries. Among the objectives of OBOR, a key one is to ease the
bottlenecks for cross-border trade, especially to investigate how to achieve a well-
connected transport infrastructure with effective logistics services (Garca-Herrero
and Xu, 2016). One Belt and One Road (OBOR) initiative or New Silk Road consists
of two major parts. First part is the Silk Road economic belt which establishes a road
stretching from China to Europe and encompassing a host of trade and infrastructure
Figure 1. New Silk Road, One Belt and One Road (OBOR)
Source: Xinhua, 2018
109
projects and secondly it aims to build maritime Silk Road which is based on sea-based
network of shipping lanes and port developments throughout Asia and the Pacific.
In 2014, it has launched the Asian Infrastructure Investment Bank (AIIB)
and set up a US$ 40 billion Silk Road Fund. Chinese officials claim that the Belt
and Road Initiative (BRI) is also part of the new round of China’s opening up.
There is certainly a lot of truth in this claim. Firstly, China is facing challenges of
overproduction and overcapacity, particularly in the steel and construction materials
sectors. This can be addressed by the BRI which will open up foreign markets to
many Chinese companies. Secondly, as labor costs rise, China will move its labor-
intensive and low value-added manufacturing facilities overseas (Li, M., and 2015:3).
After 2008 financial crisis, large supply chain managers realized the problems of
offshore production and selling at consumption areas. As well as production cost
in offshore is not so low nowadays, mass production does not meet with customer
demand. Due to the lack of mass production elasticy and with introduction of new
models such as “additive production”, the supply chain managers tend to moves
the production facilities at near shores in supply chains. Therefore, BRI has to be
improved by China because of fear in loss of market. On a macro scale, OBOR
countries have accelerate the construction of transport infrastructures to promote
cargo freight. Railway Express, for example is able to transport container from
China to Europe and other countries along OBOR. In accordance with the goals
of the OBOR strategy, cross-border e-commerce is growing rapidly. According to
reports from Ali Baba, half of its customers, which are more than 100 million, on the
Business-to-Customer (B2C) platform locate within the OBOR region. Therefore,
it can be seen that international logistics cooperation is essential to meeting the
growing demand (Lui, X. et al. 2018:1).
Following this initiative, there are two important railway systems significantly
impacting the current shipping service network from China to Europe. First, as an
important part of the OBOR initiative, the railway along New Eurasia Land Bridge
has achieved a quick development in recent years. The New Eurasia Land Bridge,
also known as the Second Eurasia Land Bridge, is an international railway line
connecting China and other Eurasia countries such as Kazakhstan, Russia, Belarus,
and Poland. Through capitalizing on the New Eurasia Land Bridge, eleven Chinese
cities have successively opened direct railway container services to European cities,
for example, Chongqing to Duisburg (Germany), Wuhan to Melnik and Pardubice
(Czech), Chengdu to Lodz (Poland), and Zhengzhou to Hamburg (Germany). By
October 2015, 1070 trains in total have left China for Europe with cargoes, as the
number of trains increased from 17 in 2011 to 623 in 2015. Thus, the cargo delivery
service provided by this railway system is continuously increasing, leading to possibly
extensive changes on the other cargo delivery services such as liner shipping (Yang,
D. and Wang, S., 2017:1).
110
Second, following the OBOR initiative, the railway system built to connect
Southern European hub ports to their hinterland is also changing the current shipping
network. In particular, in Fig. 1, Venice and Piraeus (Athens) are highlighted as two
gateway ports in Europe. In order to help build these two gateway ports and better
utilize them to construct the liner shipping service network, a Chinese liner shipping
company, i.e., COSCO, signed a concession agreement to operate Piraeus port with
the Piraeus Port Authority in 2016, which provides COSCO with 67% shares of the
port. Furthermore, COSCO is expected to invest more than half a billion euros (€552
million) in the Piraeus Port within the next five years and the investment aims ‘‘to
make Piraeus the biggest transit port in the South Europe” (Brînză, 2016).
With respect to the importance of these gateway ports in Central and Eastern
Europe (CEE), besides COSCO’s investment on the port construction, China also
cooperated with CEE to construct a high-speed rail line (as shown in Figure 2)
linking the Piraeus Port of Greece in the south to Budapest of Hungary in the north
via Skopje of Macedonia and Belgrade of Serbia.
Upon its completion by 2018, the travel time by train between Southern and
Central Europe will be significantly reduced. More importantly, the investment
on these hub ports and the railway system linking the hub ports with other inland
cities will tremendously reduce the cargo delivery time from China to other inland
European cities through these ports and thereafter the railway (Yang, D. and Wang,
S., 2017:2). In the other hand, the port of Venice is aiming to transform itself into a
Venice Offshore Onshore Port System (VOOPS), preparing for docking megaships
of 18,000 TEU and beyond.
In summary, OBOR initiative has land corridors (as shown in Figure 3) which
include (Ramasamy, 2017):
Figure 2. Rail connection from Piraeus to Middle Europe

Source: Yang and Wang, 2017
111
Figure 3. OBOR: Six Economic Corridors Spanning Asia, Europe and Africa
Source: HKTDC Research, 2018
1. The New Eurasian Land Bridge (NELB) runs from Western China to Western
Russia through Kazakhstan, and includes the Silk Road Railway through
China’s Xinjiang Autonomous Region, Kazakhstan, Russia, Belarus, Poland
and Germany;
2. The China–Mongolia–Russia Corridor (CMR) will run from Northern China
to the Russian Far East. The Russian government established Russian Direct
Investment Fund and China Investment Corporation, a Chinese government
investment agency, partnered in 2012 to create the Sino-Russian Investment
Fund, which concentrates on opportunities in bilateral integration;
3. The China–Central Asia–West Asia Corridor (CAWA) will run from Western
China to Turkey;
4. The China–Indochina Peninsula Corridor (ICP) will run from Southern China
to Singapore;
5. The Bangladesh-China-India-Myanmar (BCIM) Economic Corridor, runs from
southern China to Myanmar and is officially classified as “closely related to
the Belt and Road Initiative”;
6. The China–Pakistan Economic Corridor (CP) also known by the acronym
CPEC, also classified as “closely related to the Belt and Road Initiative,” which
is a US$62 billion collection of infrastructure projects throughout Pakistan
that aims to rapidly modernize Pakistan’s transportation networks, energy
infrastructure, and economy. On November 13, 2016, CPEC became partly
operational when Chinese cargo was transported overland to Gwadar Port for
onward maritime shipment to Africa and West Asia.
112
BACKGROUND
“The Belt and Road” Initiative is a new research field in the logistics industry because
of its strategic significance and practical value. It is the new interest area for scholars
who works research themes, such as geography including geopolitical studies, foreign
direct investment theories, optimization of transcontinental transportation, and so
on (Liu, 2015). In addition to the geography, there are several research themes to be
examined by scholars. Some relations including government-enterprise and central
& local authorities (Liu, 2015) and multiple bilateral partnerships of cross-regional
integration (Chu & Gao, 2015) are highlighted in this literature. However, the concept
still sounded vague and its content was difficult to interpret. Hence, scholars focus
on process of the initiative by examining barriers and costs, such as construction
and maintenance (He et all, 2015). Heavy infrastructure and maintenance costs
pushed scholars into research about foreign direct investments (Yang & Yan, 2015),
industrial upgrading (Dong & Liang, 2015) and industrial transformation (Su, 2015).
With regard to supply chain research field, there is a growing body of researches
on logistics literature. Sheu and Kundu (2017) proposed the use of Markov chains
to forecast time-varying logistic distribution flows for a three-layer supply chain
framework. Zeng et al. (2017) modified the gravity prediction model to calculate the
changes in transshipment traffic. Yang et al. (2017) explored a bi-level programming
model to reconstruct the shipping service network between Asia and Europe. Lee et
al. (2017) discussed the research trends on the Belt and Road initiative with a focus
on transportation and logistics.
There are also research trends with future agenda in transport, port, and
logistics in the context of OBOR. There are fourth possible research agendas for
future research trends (Lee et al, 2017). The first agenda is that hinterland size of
Shanghai is shrinking because container cargoes are to be diverted alongside the
corridors, although the quantity of cargo has not been identified by scholars. The
project “CPEC” is not a single road project but it supports Gwadar seaport, airport,
road, railway, hydropower plant, pipelines, industrial zones, and free trade zones. It
initially aims the carriage of oil/LNG from Iran and Iraq but it may also reduce the
traffic flow for tanker fleet passing through the Malacca Strait and may result to
diminish port revenues for the Port of Singapore. It also aims that container cargoes
in the inland of China heading towards Europe and Africa can be transported by
land to Gwadar Port because the “CPEC” project may cause to lower freight costs
and save time, thanks to decline in trading distance. The second research agenda is
to investigate the impacts of OBOR on regional transport systems, by performing
a possible connection test between railway and maritime networks in the region
of Euroasia. The third research agenda is closely deal with single window system
that may reduce paperwork and logistics costs and promote customs clearance
113
cooperation between container ports and cross-border custom offices. The fourth
possible research agenda is that OBOR contributes to promote international trade
connectivity, economic development, value-added, and employment during the
phase of infrastructure construction. However, infrastructure construction requires
huge investments in order to build transportation corridors. That’s why, there is a
research trend to investigate the values, positioning and routes of seaports to the
OBOR. The corridors in association with the development of Kolkata and Colombo
ports may draw port capacity issue and inter-port competition in the Indian Ocean
(Chen and Yang 2017).
Although a lot of scholars from many aspects investigated OBOR Initiative, there
is no empirical study to focus on the cost and time components and the studies were
not systematically compare traditional sea route with proposed routes of OBOR
initiative between the West Europe and East Asia. On the other hand, majority of
the studies (Bulis et al, 2014; Soong, 2016; Nazarko et al, 2017) only include the
political and economic development aspects for the specific regions such as Eastern
Europe and ASEAN states. This study does not only study specific regions but also
investigates the region of Eurasia.
The aim of the study is to propose a methodology to illustrate the cost and time
components of door to door movement by OBOR and traditional routes alongside
with modes. This study used a case study methodology to investigate the alternative
route combinations between Shanghai (China) and Rotterdam (Europe). The study is
composed of three main parts. The next part focuses on the multimodal transportation
of containerized cargoes between China and Netherlands. Then, the research model
and methodology are given. The third part analyses the case study of machinery
shipment from Shanghai to Rotterdam.
MULTIMODAL TRANSPORTATION OF
CONTAINERIZED CARGOES
Multimodal transport is well established in the general cargo and container shipping
market, where the cargo value, number of shippers and the different cargo mix allow
for combinations of routes, modes and methods. Besides, the general cargoes and
containers can present opportunities for multimodal transportation. China’s exports
to Netherlands amounted to $93.8 billion or 16.3% of its overall imports in the year
of 2017. Machinery parts which have high value commodity and small volumes, are
frequently transported by containers. The total import of machinery from China was
about $25.7 billion and its share is around 25 percent in overall import.
The principle is that increasing the size of consignment on the shipping leg can
reduce unit costs, which provides economies of scale. The consequence of the OBOR
114
initiative that general and containerized cargoes potentially makes the use of several
modes in combination including “sea maximizing and land minimizing” principle.
The efficient logistics, especially cheap shipping, thus contribute critically to the
footloose nature of much of the world’s manufacture, particularly where logistics
follow the normally preferred “sea maximizing and land minimizing” transport
model (Banomyong and and Bereford, 2001). The cost based approach taken by
Beresford (1999) would suggest that, for long supply chains, “sea maximizing and
land minimizing” is consistent with the modern manufacturing business models.
MAIN FOCUS OF THE CHAPTER
Cost model of multimodal transport originally proposed by Beresford and Dubey

(1990) and developed by Beresford (1999) was used in this study. The model is
stand-alone and very flexible enough to be applied to any operational circumtances
and to a supply chain at any lenght. The main elements of the model are cost, time,
distance, transport mode and intermodal transfer. The cost model which is used
here includes (ports, rail and freight terminals, ICD’s) and it makes use of costs,
time and distance components. The validity of model is tested against a real case in
international freight logistics, namely the export of goods Vientiane in Lao PDR to
Singapore, (Banomyong and Beresford, 2001), transport of whisky from Scotland to
Greece (Beresford, 1999), flowers from Taiwan to China (Beresford et.al., 2006a),
ATMs from Eire to China (Beresford et.al. 2006), home textile from Turkey to UK
(Denktaş Şakar and Beresford, 2009), foodstuff from Turkey to Germany (Deveci
and Denktaş, 2010), iron ore from Australia and China (Beresford et al., 2011) and
fertilizer shipment from Serbia to Turkey (Bastug, et all, 2013). The case studies
of articles are representative. Because Peters (1998) says “one very valid reason
for doing a case study is to collect information on the topic in question, especially
while the case is still in progress”. Examining the OBOR initiative while it is still in
progress may be especially valuable in comparative studies, for instance a researchers
may be less familiar with comparing alternative routes. This is why this study is
also representative case study.
The main assumptions of the multimodal transport cost model are based on the
premise that unit costs of carriage vary between transport modes and the stepness
of the cost curves highlight that for volume movements, sea transport should be the
cheapest per tone-km, rail transport should be transport cost model are based on the
premise that unit costs of carriage vary between transport modes and the stepness
of the cost curves highlight that for volume movements, sea transport should be
the cheapest per tone-km, rail transport should be fairly expensive. Cargo handling
charge is levied at ports and terminals, without any progress being made along the
115
overall supply chain and each vertical step in the cost curve represents the costs
incurred (Beresford, 1999).
The use of multimodal transport cost model is common in the context of
containerized cargoes. Therefore, the objective of this section is to propose a cost/time
methodology to illustrate the cost and time components of door-to-door movement
by available routes and modes as well as to illustrate the delays at borders or other
inspection points up to the point of destination within OBOR Initiatives.
This study used a case study methodology to investigate the alternative route
combinations between Shanghai (China) and Rotterdam (Europe). The study only
focus two main active corridors (NELB and CEE) for carriage of container cargoes.
Yin (2003:23) states that a case study is “an empirical inquiry that investigates
a contemporary phenomenon within its real-life context, especially when the
boundaries between phenomenon and context are not clear evident”. It is a research
approach that focuses on understanding the dynamics present within single setting
(Eisenhardt, 1989). It is argues that case study method is more suitable to answering
“how” and “why” questions and where the researcher has little control or no control
over events and subjects (Yin, 2003). The study uses a qualitative technique which
may be used to increase reliability. Yin (1994) suggests that the reliability can be
provided by assurance of meaningful parallelism of findings across multiple data
sources. With regard to multiple data sources, five operation managers are selected
from international freight forwarding companies in Turkey. They confirmed the
parallelism of the findings with real market.
THE CASE OF MACHINERY SHIPMENT

FROM SHANGHAI TO ROTTERDAM
China is currently undertaking what it considers the largest project of the century by
building a network of railroads and shipping lanes linking itself with 70 countries
across Asia, Africa, Europe, and Ocenia. However, there is a need to compare which
routes are actually the cost effective between Asia and Europe. Because, reliance
on silk road in international context can create problems for logistics companies.
These problems can be ranked from delays at borders, the road restrictions, empty
wagon imbalances, interruptions in rail transportation due to heavy traffic on railway
network.
The study proposed three main alternative routes currently being used by the
logistics operators and shippers in the case study in terms of transportation costs and
transit times for OBOR Initiatives. The study is assumed to transport the industrial
machinery parts by 40 foot container from Shanghai to Rotterdam by using three
different routes.
116
Table 1. Freight routing alternatives from Shanghai to Rotterdam
Route Origin Mode Transfer Mode Transfer Mode Destination

1 Shanghai Railway Chongqing Railway Duisburg Road Rotterdam
2 Shanghai Sea No Transfer Sea Venezia Road Rotterdam
3 Shanghai Sea No Transfer Sea No Transfer Sea Rotterdam
Data Source: Compiled from industry sources.
ALL RAILROAD AND ROAD TRANSPORT WITH ROUTE 1
Route 1 begins with Shanghai in China and ends at the destination point of Rotterdam
in Holland (See Figure 4).
Table 2 shows the main figures regarding the routes, costs, distance and transit
time. The first leg of the route 1 is organized as railway transportation between
Shanghai to Chongqing terminals. The 40 foot container transportation with railway
is only suggested because of 20 foot container is too risky to be organized. Because,
railway weight limit is 23 metric tonnes for 40 foot container.
Loading of container takes very short period of time to railway truck in Shanghai.
Then the cargo proceeds to Chongqing from where the distance is 1678 km. Leg
2 of route 1 is organized from Chongqing to Duisburg and its voyage lenght is
8838 km alongside with 456 hours by railway. The container free return deport is
Duisburg. Upon completion of leg 2, the cargo dropped off at Duisburg with cost of
USD 500. Then it is transported from Duisburg to Rotterdam by road. The voyage
distance is 208 km.
Figure 4. Map of Route 1
117
Table 2. All railroad and road transport with Route 1
Transit Distance Cost Cost per

Step Legs Mode
Time (km) ($) Distance
Shipment from Shanghai to
18 hours 1100
Chongqing
Railway
1 1678 0,72
Pre-Shipment Formalities Transportation 1 hour 100
Transferring to other voyage 4 hours -
Shipment from Chongqing
Railway 2400
2 to Duisburg 455 hours 8838 0,33
Transportation
Container Drop off 500
Shipment from Duisburg to Road
3 2 hours 208 800 3,85
Rotterdam Transportation
The overall transit time of route 1 is 20 days with average speeds of vehicles with
total freight 4.400 dolar alongside with container drop off charge of USD 500. In
case of any dead freight, 50% of terminal to terminal freight once upon cancellation
within 7 days and 3 days before departure, 100% of terminal to terminal freight once
upon cancellation within 3 days before departure. Figure 5 shows that time distance
and costs-distance graph of the route 1.
ALL SEAWAY AND RAILWAY TRANSPORT WİTH ROUTE 2
Second route option (as shown in Figure 6) is mostly dominated by sea transport
between Shanghai and Venice but railway transport option is included between
Venice and Rotterdam.
Main leg of the route by container ship takes 20 days and total lenght of the
sea route is 16.243 km (8871 nautical miles). The sea transportation of industrial
machinery shipment is 2709 dollar for 40 DC container. Table 3 shows the main
figures regarding shipment specifications for route 2.
The cargo is dropped off in the port of Venice and its drop off cost is USD 310.
The container is lifted and stacked, handled entirely by machine, until loaded on to
the railway wagon to take them away. There is a railroad link between Venice and
Rotterdam, spanning 1301 km with a transit time of 13 hours. The leg of railroad
transportation cost is USD 2739 between Venice and Rotterdam. Figure 7 shows
that time distance and costs-distance graph of the route 1.
118
Figure 5. Time-distance and costs-distance for all railroad and road transport
(Route 1)
Figure 6. Map of Route 2
119
Table 3. All railroad and railroad transport with Route 2
Transit Distance Cost Cost Per

Step Legs Mode
480
Shipment from Shanghai to Venice 2120
hours
Pre-Shipment Formalities (Export
Seaway
1 Service, Terminal Handling Service, 1 hour 16.243 279 0,16
Transportation
Documentation)
Merchant Haulage Imports, Terminal
5 hours 310
Handling Service, Documentation
Railway 13
2 Shipment from Venice to Rotterdam 1301 2739 0,47
Transportation hours
Figure 7. Time-distance and costs-distance for all seaway and railway transport
(Route 2)
ALL SEAWAY TRANSPORT WITH ROUTE 3
Route 3 (as seen in Figure 8) is the traditional sea transportation between port of
Shanghai to port of Rotterdam. Cargo is loaded on the port of Shanghai and then
proceed to the next port of call. The distance between the ports is 19.942 km (10.768
nautical miles) and it takes 35 days with 5 stops (Shanghai-China, Yantian-China,
Tanjung Pelepas-Malasia, Rotterdam-Netherlands). Yantian and Tanjung Pelepas are
the hub ports and they are the part of hub and spoke system. The cargo operations
120
Figure 8. Map of Route
in hub ports take only 1 day and the voyage time between the hub ports is 1 day.
The shipment cost is USD 955 alongside with the loading cost of USD 217 and
discharging of USD 284.
Table 4 shows the figures (costs, modes, transit times, distances and cost per
distance) of traditional sea transport between Shanghai and Rotterdam.
CONCLUSION
Multimodal transport can become more efficient by encouraging the development of

alternative routes, not only one transit country but also through different countries.
OBOR Iniatives is crucial for the development of multimodal transportation by
developing OBOR countries transportation infrastructures and their trades. With
Table 4. Traditional sea transport with Route 3
Transit Distance Cost Cost per

Step Legs Mode
Pre-Shipment Formalities (Export
Service, Terminal Handling Service, 2 hour 217
Documentation)
Seaway 768
1 Shipment from Shanghai to Rotterdam 19.942 955 0,07
Transportation hours
Merchant Haulage Imports, Terminal
Handling Service, Documentation at 5 hours 284
Destination
121
Figure 9. Time-distance and costs-distance for sea transportation (Route 3)
regard to One Belt and One Road policy planning guidelines, it will provide numerous
economic benefits:
1. Sustainable development in infrastructure projects for developing countries

such as Afghanistan and Pakistan;
2. Economic growth;
3. Increase in trade and decrease in transit times of goods;
4. International cooperation;
5. Peace building between nations.
The OBOR Iniatives is not limited to Eurasia but it is a global strategy and
thus, the benefits are to increase relations in the five areas of policy, finance, trade,
infrastructure, and people-to-people exchanges. Although OBOR Iniatives is in very
large extent and still under development in numerous areas and countries, this study
confirms that the project may provide the efficiency in the carriage of containerized
cargoes and fastest transit times at the early stages of OBOR Iniatives. Hence, this
analysis compares the unimodal and multimodal alternatives between China and
Europe. Costs, transit time and distance related data were considered. Beresford
Cost Model assists countries to maintain aforementioned elements for effective
operational performance of OBOR Initiatives. Table 5 shows the comparison of
the alternative routes analyzed in the study in terms of costs, time and distance.
Both route 1 and route 2 have around 18-20 days transit time. But route 3, which
uses traditional sea transportation, has a longer transit time compared to other
routes due to the time spent during sea voyage. Cost figures are also different in
122
Table 5. Evaluation of multimodal route alternatives between Shanghai (China)

and Rotterdam (Europe)
Routes Modes Distance (Km) Time (hrs) Cost ($)

Route 1 (Shanghai to Rotterdam
Railway 10.724 476 4.900
via Duisburg)
Seaway
+ 17.544 494 5.448
via Venice)
Railway
Seaway 19.942 775 1.456
via Yantian and Tanjung Pelepas)
route 3 when compared to other routes due to the cost of maritime transportation
is considerably low. While sea transportation in route 2 represents %80 of the total
distance, it accounts for 49% of the total costs. However, it is still so much expensive
for customer requirements in the supply chain of containerized cargoes. As mentioned
in future research trends, “CPEC” may offer alternative route to decrease the total
transportation cost and eventually would require time and cost analyses as new
route. It may also contribute to reducing gas emmisions from cargo movements
compared to existing routes, due to the decline in trade distance. Development of
free trade zones and industrial zones along with “CPEC” may change manufacture
production lines from China, Vietname and Taiwan. In summary, the development
of freight railways and dry ports in China’s inland regions would affect cargo flows,
environmental issues, relocation of manufacturing production line in and around
strategic trade or intermodal hubs.
Some findings, such as the principle of “sea maximizing and land minimizing”
in transportation of big cargoes by sea fit comfortably with logistics theory for
cost minimizing, but on the margins there can be room for alternative solutions for
optimizing transit times. Traditional sea transportation with containerized cargo can
be logical and cheaper when it is used in long distance as intermediate leg of the
transportation. Although ocean and rail freight have limitations as to the geographical
locations they can deliver the goods, OBOR Iniatives optimize transit times more
flexible than traditional sea transportation. However, route 1 is quicker, taking roughly
half the time of the sea journey. But it is hard to think of any goods for which it
would be worth paying such a hefty premium to get them to their destination in 18
days rather than 35. High-value products – expensive pharmaceuticals, perishable
foods, valuable electronic components which must arrive on schedule to comply
with strict just-in-time inventory management and they can be considered to be
carried by route 1. Additonally, when the railway transportation scale up to the
extent of huge amount of cargoes, a single large container ship can carry 10,000
123
40 foot container boxes between China and Europe in five weeks. To shift as many
boxes by rail would require 294 of the trains that left Rotterdam two weeks ago.
And to get them all to their destination within five weeks, they would have to leave
at intervals of no more than 80 minutes apart constantly for 18 days.
Considering the crucial importance of transportation with less time consuming
for OBOR countries has started to compete with traditional seaway transportation
but its cost is still so low. OBOR Iniatives needs the optimum utilization for cost
advantage rather than other alternatives. It may be useful to reinvestigate the time-
cost analysis for OBOR initative when other economic corridors work completely.
124
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128
Chapter 8
The Analysis on
Railway Transportation
Competitiveness and
Influencing Factors of
Typical Goods in Beijing-
Tianjin-Hebei Region:
A Case of Coal Transportation
Shiqi Li
Beijing Jiaotong University, China
Maoxiang Lang
Xueqiao Yu
Yanling Wang
Beijing City University, China
Xiao Yu
China Academy of Railway Sciences Corporation Limited, China
ABSTRACT
This chapter takes the Beijing-Tianjin-Hebei region as the research scope, selects
coal transportation as the research object, and finds out the current situation and
supply capacity of railway transportation in the context of the transportation
DOI: 10.4018/978-1-5225-8440-7.ch008
Railway Transportation Competitiveness and Influencing Factors of Typical Goods
industry’s active promotion of transportation structure adjustment. The chapter

chooses coal as an example, bases on the different influencing factors such as
transportation distance and freight rate, combines with the current situation of railway
transportation, quantitatively analyzes the superior distance and competitiveness
of typical cargo railway transportation, and obtains the superior distance between
railway transportation and road transportation the influence degree of various
influencing factors on the sharing rate of railway transportation market. Finally,
the chapter puts forward corresponding measures to improve the competitiveness
of railway transportation market.
INTRODUCTION
At present, China’s economic development mode is shifting from scale-type and

extensive growth to quality-efficiency and intensive growth, from a high-speed growth
phase to a high-quality development phase. The logistics is a comprehensive service
industry that runs through the first, second and third industries industry, contacts the
Production and Consumption, and involves a wide range of fields, great development
potential and strong driving force. The high-quality development of the logistics
industry is not only an important part of high-quality economic development, it is
also the inherent requirement of the logistics industry to achieve higher level and
higher stage development. Transportation is the basic link and important carrier of the
logistics industry, and it has a basic and main role in promoting the development of
the logistics industry. In recent years, the transportation industry has made efforts to
promote the transformation and upgrading of transportation services, and has achieved
positive results. However, the structure of the comprehensive transportation system
is irrational, the comparative advantages of various modes of transportation have
not been fully utilized, the level of comprehensive transportation organization is not
high, and the infrastructure is not well connected. The problems are still outstanding.
It is urgent to accelerate the adjustment of transportation structure, promote the
high-quality development of transportation and promote the logistics industry to
reduce costs and increase efficiency. Promoting the adjustment of transportation
structure is based on The Beijing-Tianjin-Hebei region and its surrounding areas,
The Yangtze River Delta region, and The Fenwei plain. In order to promote the
transportation of bulk cargo, the “Road Transportation to Railway Transportation,
Road Transportation to Waterway Transportation” is the main direction. Implementing
six major operations of the railway transportation capacity upgrading, the water
transportation system upgrading, the road freight transportation management, the
multimodal transport speed increase, the information resource integration, and the
urban green distribution nationwide.
129
The coordinated development of Beijing-Tianjin-Hebei is a major national strategic

move aimed at exploring the optimal allocation model of economic and industrial
resources within the economic sector of international-level urban agglomerations.
The Beijing-Tianjin-Hebei region has also become the main battlefield for the
adjustment of transportation structure. In the process of adjusting the transportation
structure and improving transportation efficiency, the Beijing-Tianjin-Hebei region
should focus on deepening the structural reform of the transportation supply side,
and strive to promote the road transportation and simple tax reduction, and promote
the “Road Transportation to Railway Transportation” for cargo transportation. The
authors will promote the market-oriented reform of railway freight transportation,
give better play to the backbone role of railways in bulk material transportation and
long-distance transportation, and further increase the proportion of railway freight
traffic in the total volume of freight in the Beijing-Tianjin-Hebei region.
The main transportation modes of coal includes railway, highway, waterway
and multimodal transportation in China. The existing coal transportation system is
mainly based on railway transportation and railway-river combined transportation,
supplemented by road transportation, and adopts the following strategies: Transporting
Coal from West to East, Transporting Coal from North to South, and Railway-sea
Combined Transportation. Due to its low cost, large capacity, good safety and fast
speed, the railway is very suitable for coal transportation. In China, the coal is the
main cargo of railway transportation. Waterway transportation has become another
important way of coal transportation because of its large volume and low cost. It
provides an alternative capacity for railway transportation and relieves the pressure
of railway transportation. Road transportation has the advantages of convenience
and “door-to-door” transportation. In coal transportation, it mainly undertakes short-
distance transportation of coal-producing areas and surrounding provinces, or coal
gathering and transportation of railway stations and ports. Although large-scale coal
transportation over long distances is not an advantage of road transportation, when
the railway transportation capacity is insufficient, the objective coal transportation
demand will also turn to road transportation. Long-distance cross-regional road
coal transportation is mainly concentrated in Shaanxi and Inner Mongolia. Some
of the coal transportation distance is short, there is no railway line, thus becoming
a “blind area” for railway transportation, which needs to be picked up by the road
transportation to fill the gap.
For the research of the competitiveness model based on generalized cost. He
Yuqiang (2006) based on the Logit model to study the passenger flow sharing rate
model of high-speed passenger line, choose economic, rapidity, convenience, comfort,
safety as five metrics, and establish Its generalized cost function. Luo Jun (2012)
applied the utility theory to the evaluation and selection between different modes
of cargo transportation. Feng Xujie (2014) added carbon emission factors to the
130
generalized cost function model. Wang Ying (2014) established a passenger flow
sharing rate calculation model based on passenger flow type and sub-train level and
proposed a correction method for passenger flow sharing rate based on passenger
utility value. Zhang Wei (2015) selected cost, time and reliability to construct multiple
Logit models for utility function property variables. Tang Jimeng (2018) based on the
truck-only transport and Rail-road Intermodal Transport’s generalized cost function,
established the competitiveness modell of Rail-road Intermodal Transport based on
stochastic utility theory. Zhang Zheng (2018) constructed a generalized cost function
based on the whole life cycle of coal circulation, and established a mathematical
model that characterizes the competitiveness of coal transportation routes.
Based on the above background, this paper takes the Beijing-Tianjin-Hebei region
as the main research area, and shifts the road transportation volume to the railway
transportation as the main research target in the main direction of transportation
structure adjustment. Taking coal transportation as an example, the current situation
of railway transportation in Beijing-Tianjin-Hebei region is analyzed. To study the
railway transportation competitiveness and its influencing factors of typical goods
in the Beijing-Tianjin-Hebei region. The rest of the paper is as follows. The second
part is based on the generalized cost construction market share rate logit model
to describe the competitiveness model of railway coal transportation and road
coal transportation. The third part analyzes the competitiveness of railway coal
transportation and calibrates the model parameters. The fourth part analyzes the
structure of the competitiveness model and different influencing factors. Finally,
some countermeasures and suggestions are proposed around the further development
of railway coal transportation in the Beijing-Tianjin-Hebei region.
CONSTRUCTION OF RAILWAY COAL TRANSPORTATION

COMPETITIVENESS MODEL BASED ON GENERALIZED COST
The economic, timeliness and environmental protection of different modes of

transportation are the main reasons that affect their competitiveness. In terms of the
choice of freight mode, the generalized cost is a perception of the “comprehensive
cost” paid by the shipper to the transportation mode chosen by him. Assuming that
the shipper is completely rational, the shipper will choose the transportation mode
with the least general cost among all the alternative modes of transport.
The calculation of generalized expenses mainly includes two algorithms of
addition and multiplication. If the effects of each factor are independent of each
other, the addition factors can be used to combine the influencing factors. If the
influence of a factor can be applied to other factors, the multiplication rule can be
used to solve it. The generalized cost function of railway coal transportation and
131
road coal transportation is composed of economic, timeliness and environmental

protection. It analyzes the cost, time spent and carbon emissions generated in all
aspects of the transportation process. Through time value, time is converted into
time cost, and carbon emission is converted into one part of generalized cost through
the social cost of carbon emission. Because the three components are independent
of each other, each has a certain impact on the competitiveness of transportation
mode. Therefore, this paper constructs a generalized cost function using additive
operation to solve the problem, and constructs a generalized cost function for railway
coal transportation and road coal transportation as follows:
GTCm Cm VOT Tm Pcarbon Em m = 1, 2 (1)
In the formula, m=1 stands for rail transportation, m=2 stands for road
transportation:
• GTCm stands for generalized expenses;

• Cm stands for the total cost of transportation unit weight of coal;
• Tm stands for the time spent in the transportation process, in days;
• Em stands for the carbon emissions generated by the transportation unit’s
volume of coal, in • kgCO 2 ;
• VOT stands for the time cost of unit weight of coal for 1 day;
• Pcarbon stands for the unit cost of carbon emissions, in Yuan/ kgCO 2 .
For the construction of the competitiveness model of railway coal transportation

and road coal transportation, the classical model of calculating the sharing rate is
adopted—Discrete selection model. The theory of stochastic utility is the theoretical
basis of the discrete selection model, which assumes that decision makers always
choose the most effective solution when faced with multiple alternatives. The
shipper has a perceptual utility on the railway coal transportation and road coal
transportation, which is random utility:
U m Vm m (2)
The random utility U m represents the revenue obtained by the shipper in selecting
the transportation mode m, Including the identification utility consisting of observable
influencing factors Vm and unobservable influencing factors ε m . The determined
utility Vm for the transportation mode m can be expressed by the inverse of its
generalized cost:
132
Vm GTCm (3)
Therefore, the shipper’s perceived utility is:
U m GTCm m (4)
According to the theory of random utility, the shipper chooses the transportation
mode with the greatest perceived utility. Because the perceived utility is random, the
shipper’s choice of the transportation mode is actually a probability problem, namely:
Pm Pr(U m U n , m n) (5)
The Pm indicates the probability that the shipper chooses the transportation
mode m and has the following properties:
0 Pm 1, Pm =1 (6)
Different discrete selection models can be obtained by assuming that the random
item ε m obeys different distribution hypotheses, such as Multinomial Logit
Model(MNL), Nested Logit Model(NL), Generalized Extreme Value Model(GEV),
Mixed Logit Model(MXL), Multinomial Probit Model(MNP). This paper assumes
that the random items ε m are independent of each other and obey the Gumbel
distribution. Then the selection probability Pm of the transportation mode m can be
calculated using the commonly used and fairly mature MNL model:
exp( GTCm )
Pm = (7)
exp( GTCm )
θ stands for the parameters that needs to be determined, Its value is related to
the variance of the ε m , θ can be seen as a measure of the shipper’s familiarity with
the entire network.
In the model, the selection probability of the transportation mode m is determined
by the absolute difference in utility between transportation modes. When the
generalized cost value is too large, some unreasonable results will be generated.
Therefore, this paper uses the relative utility to calculate the selection probability
of the transportation mode. Improve the model to:
133
exp( GTCm / GTCmin )

Pm = (8)
exp( GTCm / GTCmin )
In the formula, GTCmin indicates that the generalized cost is relatively small
among the railway coal transportation and road coal transportation.
THE CASE ANALYSIS ON RAILWAY COAL TRANSPORTATION

COMPETITIVENESS IN BEIJING-TIANJIN-HEBEI REGION
Coal belongs to the typical bulk cargo and is an important part of China’s transportation
market. At present, there are two main types of coal shipments in China. One is to
transport by railway after short-distance transportation to a dedicated line (or railway
station). Another is to directly access the dedicated line at the coal loading point
and transports it to the main line by dedicated line. The way the coal is transported
from the coal mine pit to the railway line is different. As the Beijing-Tianjin-Hebei
region is China’s main coal use zone, coal is transported from the “The Sanxi Area”
regions through the “Transporting Coal from West to East” . It is also the main
issuing place of “Transporting Coal from North to South”. Therefore, considering
that coal transportation is mostly issued by major coal-producing bases and transports
to major ports or large power plants, steel plants and other end points, there are
many coal- dedicated lines connecting to the land. The coal transportation studies
is mainly based on the second type of shipping in this paper.
Determination of Parameter Values
Railway Transportation Costs
The transportation cost is the main component of the cost of railway coal transportation.
The main line transportation price between the railway station and the station is
mainly based on the base price of the first part and the base price of the second
part, plus the railway construction fund and other expenses. The cost is relatively
stable and is mainly related to the railway transportation distance. At present, the
base price of the first part of the railway coal transportation is 16.3 yuan/t, the base
price of the second part is 0.098 yuan/tkm.The railway construction fund rate is
0.033 yuan/tkm. The railway electrification surcharge decreased from 0.012 yuan/
tkm to 0.007 yuan/tkm on June 1, 2017.
134
The Dedicated Line Usage Fees
The dedicated line that liked the “capillary” is the important supplement to the
railway transportation. Due to restrictions on transportation volume and funds,
some enterprises are unable to build dedicated lines themselves, and they need to
use dedicated lines of other enterprises. Therefore, they need to pay dedicated line
usage fees. Some enterprises have their own dedicated lines. Considering the use
of dedicated lines to generate depreciation, maintenance, dust suppression, etc., it
is also necessary to calculate the dedicated line usage fees. According to the actual
research results, the dedicated line usage fees is 25.87 yuan/t.
Road Transportation Costs
Since the rectification of road transportation overload on September 21, 2016, the
number of road transportation vehicles has been insufficient, and it is difficult to
meet the demand for coal transportation, and transportation costs have risen rapidly.
According to the trend of China’s coal road freight rate, the cost of road coal
transportation in 2018 is long-distance 0.3 yuan/tkm (400 km or more), medium-
distance 0.49 yuan/tkm (100-400 km) and short-distance 0.71 yuan/tkm (0- 100
km). Since the coal transportation studied in this paper is mainly transported from
the “Shanxi, Shaanxi and West of Inner Mongolia” to the Beijing-Tianjin-Hebei
region, most of them are long-distance transportation, so the road freight rate is
0.3 yuan/tkm.
Other Relevant Parameters of Coal Transportation
• Dedicated line pick-up fare: 9 yuan/car km;

• Average line distance of dedicated lines: 4 km at each end;
• Railway loading and unloading operation fees: 11.2 yuan/t;
• The static load of the coal-traffic railway wagon: 70 tons/car;
• Road transportation loading and unloading fees: 6.9 yuan/t;
• Unit weight coal value: 640 yuan/t;
• Daily interest rate: 0.02%;
• The carbon emissions per unit of freight turnover of diesel locomotives:
9.07g/tkm.
The carbon emissions per unit of freight turnover of electric locomotive: 11.37g/
tkm; (The carbon emission intensity of cargo trains drawn by electric locomotives
is larger than that of diesel locomotives. The main reason is that the proportion of
coal power in China’s power production is quite large, resulting in a higher carbon
135
emission coefficient of China’s power life cycle. It is more than twice the European
average.)
• The carbon emissions per unit of freight turnover of railway transportation:

11.24g/tkm;
• The carbon emissions per unit of freight turnover of road transportation: 48g/
tkm;
• The carbon emission cost: 0.000166 yuan/g.
Parameter Determination
Taking the trunk transportation distance of 600km, the dedicated line distance of
8km, and the coal transportation capacity of 70 tons as the example, the example
calculation can be used to obtain the general cost of 70t coal for railway and road
transportation as follows:
GTC1 C1 VOT T1 Pcarbon E1 =10384.4+9×4+0.166×472.1=10498.8yu

an
GTC2 C2 VOT T2 Pcarbon E2 =13566+9×1+0.166×2016=13909.7yu

an
According to the survey, the number of coal transported by Shanxi Province

to other provinces accounted for 73%, and the amount of coal transported by road
transportation to other provinces accounted for 11% in 2017. The ratio of railway
transportation to road transportation is 87%: 13%.
The above calculation result is brought into the Formula (8), thereby calculating
the parameter θ of 5.85.
Substituting the parameter θ=5.85 into the Formula (8), the distribution rate of
the railway transportation and road transportation market are both 50% when the
trunk line distance is 322km, which means that road transportation has an advantage
in the range of [0,322] km, and when the trunk line distance is more than 322km,
the railway transportation advantage becomes more and more obvious with the
increase of the transportation distance.
136
THE ANALYSIS ON COMPETITIVE MODEL STRUCTURE

AND INFLUENCING FACTORS OF RAILWAY COAL
TRANSPORTATION IN BEIJING-TIANJIN-HEBEI REGION
The Analysis on Competitive Model Structure
Due to the combination of different trunk transport distances and dedicated line
distances, the general cost of road transportation and railway transportation will vary
greatly. Therefore, based on the examples constructed by the actual survey and the
parameters given in 3.1, this section analyzes the changes in the generalized costs
of railway transportation and road transportation at the combination of different
trunk transport distances and dedicated line pick-up distances.
The generalized cost components of railway coal transportation and road coal
transportation are numbered. The generalized cost of railway transportation includes
5 parts, and the generalized cost of road transportation includes 4 parts, as shown
in Table 1.
With a trunk transportation distance of 600km and a dedicated line distance of
8km as the benchmark, in the case of a combination of different trunk transportation
distances (300km, 400km, 500km, 600km, 700km) and dedicated line distances
(4km, 8km, 12km, 20km), Calculate the proportion of the various components of
the generalized cost of railway coal transportation and road coal transportation.
The proportion of the generalized cost of the road at the combination of different
transportation distances is shown in Figure 1.
As can be seen from Figure 1, the generalized cost of road transportation is
mainly composed of road transportation costs, and with the increase of transport
distance, the proportion of this part has increased, the transport distance is 300km,
400km, 500km, 600km, 700km respectively. At that time, their proportions were
Table 1. The generalized cost of railway transportation and road transportation
The Generalized Cost of Road The Generalized Cost of Railway

Number Number
Transportation Transportation
Road transportation loading and Railway transportation loading and
1 1
unloading fees unloading fees
2 Road transportation cost 2 Railway dedicated line operation fees
3 Road transportation time cost 3 Railway transportation costs
Road transportation carbon emission
4 4 Railway transportation time cost
social cost
Railway transportation carbon emission
5
social cost
137
Figure 1. The proportion of the various components of the generalized cost of road
coal transportation
84.7%, 87.5%, 89.3%, 90.6%, and 91.5%, respectively. Since the Road transportation
loading and unloading fees are independent of the transportation distance, the costs
incurred are unchanged, and as the transportation distance increases, the proportion
is gradually reduced. Since the transportation time is within one day, the proportion
of this part is consistent with the road transportation loading and unloading fees.
Although the social cost of road transportation carbon emissions has increased
with the increase of transportation distance, its proportion in generalized expenses
is relatively small, about 2.4%.
Therefore, road transportation costs account for the vast majority of generalized
expenses, and increase with the increase of transportation distance, while the
proportion of the total of the road transportation time cost, the road transportation
carbon emission social cost and road transportation loading and unloading fees
are small, indicating the road transportation is a costly, time-efficient means of
transportation.
Similarly, when the trunk transportation distances are respectively 300km, 400km,
500km, 600km, 700km, and the dedicated line distances are 4km, 8km, 12km, 20km,
the authors calculate the combination of different trunk transportation distances
and dedicated line distances is calculated. The proportion of the generalized cost
of railway coal transportation are shown in Figure 2.
It can be seen from Figure 2 that at the combination of different trunk transportation
distances and dedicated line distances, the proportion of each component of the
138
Figure 2. The proportion of the various components of the generalized cost of

railway coal transportation
generalized cost of railway transportation has a certain difference. The higher

proportion of the generalized cost of railway transportation is mainly the railway
transportation cost and the dedicated line operation fees. The former increases
with the increase of the transportation distance, and the latter decreases with the
increase of the transportation distance, for example, at the dedicated line distance
is 8km, when the trunk transportation distance are 300km, 400km, 500km, 600km,
700km respectively, the proportion of the dedicated line operation fees are 26.0%,
23.0%, 20.7%, 18.8%, 17.2%, and the proportion of railway transportation costs
are 52.5%, 57.7%, 61.9%, 65.2%, 68.0%, and the other similar line distances have
the similar trends.
In addition, as the distance of dedicated lines increases, the proportion of dedicated
line operation fees increases gradually, while the proportion of railway transportation
costs decreases. For example, when the trunk transportation distance is 600km, the
distance of dedicated lines increases (4km, 8km, 12km and 20km), the proportion
of dedicated line operation costs are 18.5%, 18.8%, 19.1% and 19.6%, respectively.
139
The proportion of railway transportation costs are 65.4%, 65.2%, 65.0% and 64.5%,
and the other similar line distances have the similar trends.
At the combination of different trunk transportation distances and dedicated
line distances, the proportion of the two main types of railway transportation are
between 78.4% and 85.3%, compared with 84.7%--91.5% of the proportion of road
transportation costs. The difference between the two is about 6%.
Although the railway transportation time cost is not very large, compared with
the road transportation time cost, the railway transportation time cost is about three
times that of road transportation time cost. In terms of carbon emission social costs,
the railway transportation carbon emission social cost accounts for between 0.5%
and 0.8%, while the road transportation carbon emission social cost is relatively
large, accounting for between 2.2% and 2.4%.
Analysis of Influencing Factors of Railway Coal Transportation
Since the generalized cost is directly related to competitiveness, therefore, according to

the analysis of the proportion of the generalized expenses of railway coal transportation
and road coal transportation in Section 4.1, the sensitivity analysis is carried out
by selecting the influencing factors with a large proportion, including road freight
rate, railway freight rate, dedicated line operation fees and railway transportation
loading and unloading fees.
According to the analysis of Section 4.1, at the combination of different trunk
transportation distances and dedicated line distances, the proportion of each
component of generalized expenses is different. As a result, the impact of various
influencing factors on the competitiveness of railway coal transportation may be
different. Therefore, when analyzing the sensitivity of each factor, the dedicated
line distances are taken as 4km, 8km, 12km, and 20km, and the trunk transportation
distance varies between [300, 1000]km, and the step length is 100km.
Road Freight Rate
The other parameters are fixed, and the road freight rate are in the interval [0.26,
0.34], and the step length is 0.02, unit: yuan/tkm. At the combination of different
trunk transportation distances and dedicated line distances, the sharing rate calculation
formula is used to analyze the impact of the road freight rate changes on railway
coal transportation competitiveness. The results are shown in Figure 3.
As can be seen from Figure 3.
At the distance of each dedicated line, when the road freight rate takes different
values, the share of the railway transportation market has maintained the same growth
with the increase of the transportation distance. It has a similar phenomenon when
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Figure 3. The impact of the road freight rate changes on railway coal transportation
competitiveness
the sensitivity analysis of other influencing factors is carried out. Which shows
that with the increase of the transportation distance, the advantage of low freight
rate of railway transportation becomes more and more obvious. It can make up for
the disadvantages of the high loading and unloading operations fees and the long
railway transportation time. Thereby increasing the competitiveness of railway coal
transportation.
At the distance of 600km, when the road freight rate increases from 0.26
yuan/tkm to 0.34 yuan/tkm, the sharing rate of the railway transportation market
corresponding to the dedicated line distances of 4km, 8km, 12km and 20km are
21.7%, 22.1%, 22.4%, 23.0% respectively. It can be seen that the greater the distance
of the dedicated line, the more obvious the effect of the increase in the road freight
rate on the competitiveness of railway transportation.
When the current road freight rate is 0.3 yuan/tkm, it will have a greater impact
on the railway transportation market share rate if it rises by 0.02 yuan/tkm and
decreases by 0.02 yuan/tkm. If the road freight rate decreases by 0.02 yuan/tkm (0.28
yuan/tkm), when the transport distance is 600 km, the railway transportation market
share rate is 80.7% (the dedicated line distance is 8km, as shown in Figure 3b). If the
141
increase is 0.02 yuan/tkm, the same trunk transportation distance and dedicated line
distance, the railway transportation market share rate reaches 91.4%. However, the
road freight rate continues to rise, and the effect of improving the competitiveness
of the railway transportation market has been weakened. If the road freight rate
increases from 0.32 yuan/tkm to 0.34 yuan/tkm, the railway transportation market
share rate only increases by 3%.
It can be seen that the small fluctuations in the road freight rate will have a greater
impact on the sharing rate of the railway transportation market. Especially when the
transportation distance is short, the effect is more obvious. Therefore, in the context
of “Road Transportation to Railway Transportation”, with the implementation
of road rectification overload and the rise of oil and labor costs, not only can the
road freight market return to a normal and orderly state, but also a greater role in
promoting the development of railway coal transportation.
Railway Freight Rate
The railway freight rate mainly affects the railway transportation cost part of the
railway generalized cost. This part mainly analyzes the influence of the base price
of the second part of the railway freight rate and the electrification surcharge on the
railway coal transportation competitiveness.
1. The base price of the second part of the railway freight rate.
The other parameters are fixed, and the base price of the second part of the
railway freight rate are in the interval [0.049,0.123], and the step length is 0.0247,
unit: yuan/tkm. At the combination of different trunk transportation distances and
dedicated line distances, the sharing rate calculation formula is used to analyze
the impact of the base price of the second part of the railway freight rate changes
on railway coal transportation competitiveness. The results are shown in Figure 4.
When the base price of the second part of the railway freight rate are between
0.049 yuan/tkm and 0.123 yuan/tkm, the corresponding railway transportation
market share rate curve is surrounded by a reverse “horn” pattern. That is, as the
distance increases, the decline in the base price of the second part of the railway
freight rate has gradually weakened the effect of increasing the share of the railway
transportation market. When the dedicated line distance is 8km (as shown in Figure
4.4b), if the base price of the second part of the railway freight rate drops from
0.123 yuan/tkm to 0.049 yuan/tkm, at the trunk line distance of 300km, 600km and
900km, corresponding the share of the railway transportation market increases by
31.6%, 21.0% and 10.5% respectively. The current base price of the second part of
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Figure 4. The base price of the second part of the railway freight rate changes on
railway coal transportation competitiveness
the railway freight rate is 0.098 yuan/tkm, and if it is reduced by 50% (0.049 yuan/
tkm), when the dedicated line distance is 8km, at the 300km, 600km and 900km
mainline transport distances, the corresponding railway transportation market share
ratio increases by 21.6%, 10.8% and 4.2% respectively.
It can be seen from the above analysis that when the transportation distance is
short, the change of railway freight rate has a great influence on the sharing rate of the
railway transportation market. When the transportation distance is long, the impact
of changes in railway freight rates on the sharing rate of the railway transportation
market has been reduced. Therefore, railway transportation enterprises can change
the current single freight rate strategy and formulate a new segmented freight rate
strategy. For short-distance transportation, the freight rate should be appropriately
reduced in order to expand its market share rate and increase transportation revenue.
For long-distance transportation, it has already occupied an absolute advantage in
market share, and no further price cuts can be made.
2. The electrification surcharge.
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The other parameters are fixed, and the electrification surcharges are 0 yuan/t·km,
0.007 yuan/t·km and 0.012 yuan/t·km. At the condition that the dedicated line distance
is 8km, the sharing rate calculation formula is used to analyze the impact of the
electrification surcharge changes on railway coal transportation competitiveness.
The result is shown in Figure 5.
According to the Notice of the National Development and Reform Commission
on Abolishing the Repayment of Electricity Prices for Electrified Railway Power
Supply Projects (Development and Reform Price [2017] No. 1005), China Railway
Corporation research decision, since June 1, 2017, the railway electrification
surcharge has been reduced. The electrification surcharge for the approval of
the national railway electrification section of the national railway unified tariff
will be lowered. The electrification surcharge for railway vehicle transportation
is reduced by 0.005 yuan/ton. At the trunk transportation distances of 300km,
600km and 1000km, compared to before the downgrade, the share of the railway
coal transportation market increased by 1.4%, 1.2% and 0.5% respectively. If the
electrification surcharge is cancelled, the share of the railway coal transportation
market will increase by 2.0%, 1.6% and 0.7% compared with the current level. It can
be seen that the electrification surcharge has a relatively small impact on the market
share rate in long-distance transportation, but in the short-distance transportation
market, reducing the electrification surcharge is conducive to improving the market
competitiveness of railway transportation.
Figure 5. The electrification surcharge changes on railway coal transportation

competitiveness
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Figure 6. The dedicated line operation fees and railway transportation loading and
unloading fees changes on railway coal transportation competitiveness
Dedicated Line Operation Fees and Railway

Transportation Loading and Unloading Fees
In the baseline scenario, the dedicated line operation fees and railway transportation
loading and unloading fees is 3468.9 yuan. The other parameters are fixed, the
dedicated line operation fees and railway transportation loading and unloading fees
are in the interval [2081.3,3815.8]yuan, and the step length is 10% of the dedicated
line operation fees and railway transportation loading and unloading fees. At the
combination of different trunk transportation distances and dedicated line distances,
the sharing rate calculation formula is used to analyze the impact of the dedicated
line operation fees and railway transportation loading and unloading fees changes
on railway coal transportation competitiveness. The results are shown in Figure 6.
Since the dedicated line operation fees and railway transportation loading and
unloading fees do not change with the change of the dedicated line distance and the
trunk transportation distance, it is a relatively fixed expenditure. Therefore, as the
distance of the dedicated line increases and the distance of the trunk line increases,
145
the total cost has increased, while the proportion of dedicated line operation fees and
railway transportation loading and unloading fees has gradually decreased. Therefore,
with the increase of dedicated line distance and trunk transportation distance, the
railway transportation market share rate is gradually increasing.
At present, the proportion of special line operation fees and railway transportation
loading and unloading fees in total expenses is second only to the main line
transportation costs. Therefore, with the reduction of dedicated line operation fees
and railway transportation loading and unloading fees, the market share of railway
transportation will increase. With the increase of the dedicated line distance and the
trunk transportation distance, there is a “end gathering” phenomenon in the railway
transportation sharing rate curve corresponding to the operation cost of different
special lines and the railway loading and unloading fee. When the dedicated line
distance is 8km, if the dedicated line operation fees and railway transportation
loading and unloading fees decrease from 3815.8 yuan (up 10%) to 2081.3 yuan
(down 40%), when the trunk transportation distance are 400km, 600km, 800km
and 1000km respectively. The corresponding railway transportation sharing rates
increases by 26.7%, 11.7%, 5.5% and 2.9% respectively.
Therefore, at this stage, the relevant operational links of railway coal transportation
are optimized, and the related operating costs are lowered, which has a positive effect
on improving the competitiveness of railway coal transportation.
CONCLUSION
Taking coal transportation as an example, this paper analyzes the competitiveness

of railway transportation market and its influencing factors of typical goods in
Beijing-Tianjin-Hebei region. The main findings are as follows.
In the whole process of railway coal transportation, railway transportation costs
and dedicated line operation fees are the main components of the generalized cost of
railway transportation. The former increases with the increase of the transportation
distance, while the latter decreases with the increase of the transportation distance.
In addition, with the increase of the distance of dedicated lines, the proportion of
dedicated line operation costs has gradually increased, while the proportion of railway
trunk line transportation costs has decreased. Although the transportation time cost
is not very large, compared with road transportation, the railway transportation time
cost accounts for about three times the road transportation time cost. In terms of
the social cost of carbon emissions, the railway transportation is about a quarter of
the road transportation.
It is understood that when it is about 322 kilometers, the road transportation
market share rate and the railway transportation market share rate are both 50% by
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calculating. The advantage of the railway transportation is gradually manifested

above 322km. And with the increase of the distance, the advantage is more and
more significant.
Through the analysis on the competitiveness of railway coal transportation, the
factors such as road freight rate, railway freight rate, dedicated line operation fees
and railway transportation loading and unloading fees have a great influence on the
market share of railway transportation. The fluctuation of the road transportation
rate level will have a greater impact on the railway transportation market share
rate, especially when the transportation distance is short, the impact effect is more
obvious. When the transportation distance is short, the change of railway freight rate
has a greater impact on the sharing rate of the railway transportation market. When
the transport distance is long, the impact of changes in railway freight rates on the
share of the railway transportation market has decreased. At this stage, the relevant
operation links of railway coal transportation are optimized, and the related operating
costs are lowered, which has a positive effect on improving the competitiveness of
railway coal transportation.
ACKNOWLEDGMENT
Author Contributions: Writing: S.L. and M.L.; Providing case and idea: X.Y.,
Y.W., and X.Y..
Funding: This research was supported by National Key R&D Program of
China (2018YFB1201402) and National Key R&D Program of China
(2016YFE0201700).
Conflicts of Interest: The authors declare no conflict of interest.
147
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Emissions for High-speed Railways. Beijing, China: Beijing Jiaotong University.
He, Mao, Chen, & Yang. (2006). The Mode Share Model of the High-speed Passenger
Railway Line and Its Application. Journal of the China Railway Society, 2006(3),
18-21.
Jun, L. (2012). Research on Model of Freight Transportation Mode Choice Based
on Behaviour Analysis. Wuhan, China: Wuhan University of Technology.
Tang, J. (2018). Competitiveness of Container Rail-road Intermodal Transport
and Its Improving Strategies in China. Beijing, China: Beijing Jiaotong University.
Wei, Z., Jian, W., & Zhu, L. (2015). Reliability Analysis of Railway Container
Transport Time. Journal of the China Railway Society, 37(11), 10–15.
Ying, W. A. N. G., Dan, H. A. O., Hai-ying, L. I., Xiao-jie, Y. A. N., & Huan-
dong, W. A. N. G. (2014). Research on Share Rate of Passenger Flow in Railway
Transportation Corridor Based on Matching between Supply and Demand. Journal
of the China Railway Society, 36(12), 1–5.
Zheng, Z. (2018). Empirical Study of Coal Transportation on Multimodal Transport
Network in China. Beijing, China: Beijing Jiaotong University.
148
KEY TERMS AND DEFINITIONS
Beijing-Tianjin-Hebei Region: The “capital economic circle” of China, including

Beijing, Tianjin, and Hebei Province.
Fenwei Plain: The Fenhe Plain, Weihe Plain, and their surroundings in the
Yellow River Basin.
Road Transportation to Railway Transportation: Adjusting the transportation
structure, converting some of the goods originally transported by road into railway
transport.
Road Transportation to Waterway Transportation: Adjusting the transportation
structure, converting some of the goods originally transported by road into waterway
transport.
Sanxi Area: Including Shanxi Province, Shaanxi Province, and Western Inner
Mongolia.
Transporting Coal From North to South: Transporting abundant coal resources
in the North Region to the South Region where coal resources are scarce.
Transporting Coal From West to East: Transporting abundant coal resources
in the Western Region to the Eastern Region where coal resources are scarce.
Yangtze River Delta Region: Including Shanghai, Jiangsu Province, and
Zhejiang Province.
149
150
Chapter 9
The Development of
Electrolytic Aluminum
Industry and the Belt
and Road Strategy:
A Collaborative Innovation Perspective
Ping Zhou
Gexin Han
Xinyao Li
Northeast Electric Power University, China
ABSTRACT
Innovation ability is the key to enterprise development. China’s electrolytic aluminum
enterprises have maintained a high growth rate for many years and have become
one of the industries with the highest social contribution rate in the non-ferrous
metal industry. However, a prominent problem in the development process of the
industry is to put less emphasis on innovation and investment. Excessive production
capacity due to blind investment has become a common disease of enterprises,
which has seriously affected their performance. This chapter tries to explore
cooperative motivation, innovation, and development of the electrolytic aluminum
enterprise. The aim is for the enterprise to find source sex power basis, combined
with the strategy of “area,” all the way to the electrolytic aluminum enterprise
value influence, understand all kinds of system to the importance of the synergy
of electrolytic aluminum enterprises, in order to further promote collaborative
innovation measures to provide adequate basis.
DOI: 10.4018/978-1-5225-8440-7.ch009
The Development of Electrolytic Aluminum Industry and the Belt and Road Strategy
BACKGROUND
As one of the major non-ferrous metal mineral resources, aluminum is an indispensable

and important element in modern industry, agriculture, national defense, and the
development of science and technology. It has been widely used in many fields,
such as architecture, transportation, electricity, and packaging, and is a basic raw
material that cannot be replaced by modern high-tech development. As the basic
raw material of industrial development, aluminum, which is one of the industries
with the highest social contribution rate in China’s non-ferrous metal industry,
does not pollute the environment during use and is highly sought after for its high
recycling and utilization. In China, aluminum has become the second largest metal
material after steel, and the electrolytic aluminum industry has maintained rapid
growth. Among all non-ferrous metal varieties, the growth rate has been the fastest
for many years.
In the early 20th century, as a result of the guidance of China’s industrial policy
and the encouraging guidance of macro-control policy, China’s aluminum industry
has achieved very rapid development and made relatively important contributions to
the economic development of the motherland. However, in recent years, the reckless
activity of investors has led to a remarkable acceleration of the development of
China’s electrolytic aluminum projects, which eventually led to the extreme excess of
China’s electrolytic aluminum production capacity. The phenomenon of oversupply
has become increasingly serious, and it is difficult to reverse in the short term. In
addition, still a few enterprises have used to build first, cause already become fact
hind to declare to examine and approve to wait for a method to build or expand
electrolytic aluminum project. Since competition in the electrolytic aluminum industry
is more intense, the market price has flagged for a long time. Consequently, the
contradiction, such as a gradually enlarged loss area of the enterprise, is highlighted
more and more. Since 2003, the Chinese government has stepped up its regulation
of the electrolytic aluminum industry, hoping to slow down the biggest problem in
the industry: excess capacity. However, the actual situation is not as the government
expected. For more than 10 years, this state has not been effectively alleviated. Excess
capacity leads to oversupply of electrolytic aluminum, low market price, weakened
profitability of enterprises, and strong difficulty with surviving.
Proposed in 2013 by the Chinese President Xi Jinping, area along the “backbone”
port of more than six galleries all nations” big pattern gradually forming. “Six
corridors” refers to the corridor through six international economic cooperation
areas, including the new Asia-Europe continental bridge, in Russia, China, central
Asia, west Asia, China and Indochina China and India, Pakistan, Bangladesh, and
Myanmar economic corridor. “Six roads” refers to the six major road networks, which
facilitate the interconnection of railway, highway, waterway, airway, pipeline, and
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information superhighway. “Multinational” refers to the cultivation of a number of

fulcrum countries. In accordance with the need to promote the construction of “One
Belt, One Road” and the initiative of countries along the belt and road, a number of
fulcrum countries will be cultivated in Central Asia, Southeast Asia, South Asia,
West Asia, Europe, and Africa. “Multi-port” refers to the construction of several
maritime fulcrum ports, the construction of a number of important ports centering
on the 21st century maritime silk road, and the promotion of a number of important
ports with prominent regional advantages and obvious supporting functions through
various means. Infrastructure construction, such as railway transportation, oil
pipelines, industrial plants, and power investment, will effectively drive the growth
of consumption and export of at least six non-ferrous metal varieties in China,
including copper, aluminum, lead, and zinc. “One Belt, One Road” is conducive to
China’s electrolytic aluminum industry to carry out international production capacity
cooperation and transfer China’s production capacity, as well as technology and
capital. It is not only beneficial to countries along the belt and road, but also China
can seize the opportunity to optimize the industrial structure and upgrade enterprises’
operation and management mode. In recent years, the pace of “going out” has been
accelerating, the scale is getting larger and higher, and remarkable results have been
achieved. Taking an active part in the construction of “One Belt, One Road” will
help Chinese electrolytic aluminum enterprises to seize the historic opportunity
of the new round of international production capacity cooperation, deeply explore
new modes and new paths of foreign economic cooperation, and comprehensively
integrate the advantageous resources inside and outside the industry (Zahra, 1996).
DEVELOPMENT OF ELECTROLYTIC ALUMINUM ENTERPRISES

FROM THE PERSPECTIVE OF COLLABORATIVE INNOVATION
Theoretical Research on Collaborative Innovation
All aspects of innovation complement each other, so none can be excluded.

Undoubtedly, the establishment of enterprise innovation system and the use of
system innovation is the inevitable choice to improve the success rate of enterprise
innovation. Therefore, if an enterprise wants to survive and develop in the fierce
market competition, it must rely on technological innovation, management innovation,
and system innovation.
The economic development of electrolytic aluminum enterprises is a complex
system engineering. It is difficult to realize the action of a certain innovation. Only
the innovation in various aspects can coordinate cooperation with each other, so
as to effectively promote the prosperity of regional economy. No matter which
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kind of innovative thinking theory, the internal operation process of the system is
complex, and the process is a very complex organizational behavior. Therefore,
in order to understand the technological innovation in electrolytic aluminum
enterprise’s innovation system accurately, it is necessary to introduce the category
of self-organization theory (i. e., the theory of synergetics) to comprehensively and
systematically explore (Adner & Kapoor, 2010).
In the 1970s, Harken established the theory of synergy. Synergetics theory to
mutation theory, information theory, and cybernetics are some new achievements of
modern science theory (Hitt & Ireland, 1985). At the same time, the adoption of the
combination of the statistical and dynamic test method, drawing on the successful
experience of the theory of dissipation structure, further reveals the various systems
and phenomenon, from disorderly to orderly, shift in common law. According to
the theory of synergetics, the generation and transformation of self-organization in
the social system is determined by competition and collaboration. The key to the
transformation of a system from disorder to order lies in whether the subsystems
that make up the system can produce coherent effect and synergistic effect through
nonlinear interaction under certain conditions, and generate order in structure and
function through this effect. This kind of cooperative movement means the emergence
of a new ordered state of the system, showing the self-organization phenomenon
of the system on the macro level. In addition, the synergetic theory further points
out that the transformation of a system from disorder to order lies in the synergetic
phenomena and coherent effects of the nonlinear interactions between subsystems,
which is an important leap based on the theory of dissipative structure (Stalk, Evans
& Shulman, 1992).
In the process of technological innovation in electrolytic aluminum enterprises, the
nonlinear interaction among the elements or subsystems in the innovation system is
reflected in many aspects. Firstly, nonlinear and complicated relations occur among
production factors, such as capital, technology, talent, information, and equipment.
In addition, these relations often mutually cause and effect, which jointly promote
the development of the electrolytic aluminum enterprises’ innovation system. In
particular, the nonlinear relationship between technical elements and non-technical
elements (e.g., strategy, culture, and organization) is of particular concern. Secondly,
nonlinear interrelations occur among the functional departments of the electrolytic
aluminum enterprise innovation system. The internal functional departments of
electrolytic aluminum enterprises, such as research and development, production,
marketing, human resources, and financial departments, have interactive relations
in the process of technological innovation, and jointly participate in the practice of
innovation to promote the successful realization of innovation. Literature research
indicates that the good coordination of internal functional departments is the key to
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the successful practice of enterprise technological innovation. Thirdly, a nonlinear

interaction occurs between electrolytic aluminum enterprises and universities, research
institutes, or enterprises. In most cases, technology innovation in electrolytic aluminum
enterprises cannot be isolated (Gao, 2009). Not only is mutual cooperation necessary
between the various functional departments within the enterprise collaborative, it is
also paramount for electrolytic aluminum enterprises to actively seek external forces
and resources. Further, the external form of the interaction relationship between
the main body and promotes the improvement of ability and level of enterprise
technology innovation.
The concept of fluctuation in synergetic theory deserves attention. Order
parameter is one of the most important concepts. The order parameter is a kind of
macroscopic parameter which is integrated by the complex nonlinear interaction
among the subsystems during the operation of the system. The small fluctuations the
system produces during operation can be amplified into huge fluctuations through
the nonlinear interaction, which makes the system present significant characteristic
changes. Therefore, fluctuation is regarded as an important inducement of system
evolution. In the electrolytic aluminum enterprise innovation system, the fluctuation
phenomenon exists, generally. For example, the introduction of new technology, the
improvement of quality of scientific research personnel, and research and development
funds investment relative to the previous level will form a fluctuation. Again, through
the internal complex nonlinear interaction of the electrolytic aluminum enterprise
innovation system, the fluctuation factors be amplified, eventually form to promote
significant changes in the huge fluctuations of the electrolytic aluminum enterprise
innovation system. Thus, electrolytic aluminum enterprises produce and enhance
the resulting innovation performance. In conclusion, the purpose of constructing
the theory of synergetics is to use a systematic perspective to examine the object of
study and establish a series of theories and methods to deal with complex systems,
so as to better understand the operation rules of the system.
Internal Collaborative Innovation Model of

Electrolytic Aluminum Enterprises
At present, domestic and foreign innovation research on electrolytic aluminum

enterprises mainly focuses on technological innovation, management innovation,
and system innovation. On the basis of integrating previous research results, this
chapter tentatively proposes the relationship model between collaborative innovation
and traditional innovation performance (Figure 1).
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Figure 1.
Analysis of Internal Collaborative Innovation

of Electrolytic Aluminum Enterprises
For the micro individual of the enterprise, innovation refers to obtaining higher benefit
by establishing a new system with stronger efficiency and higher efficiency. The
reason for the continuous development of the enterprise is that it constantly introduces
innovation in the operation system. At present, in electrolytic aluminum enterprises
in excess capacity, or in market downturn in the severe situation, innovation has
become the main melody of development. The Central Economic Work Conference
proposed that the fundamental way out of overcapacity is innovation, including
technological innovation, management innovation, and institutional innovation.
Technological Innovation
Innovation of electrolytic aluminum enterprises is the focus of technological

innovation. Through operation and management, production conditions and factors
are reorganized to establish a production system with higher efficiency and lower
cost, so as to launch new products and production methods, and open up new markets.
155
This is a comprehensive process of a series of activities. Technological innovation

is an important prerequisite for electrolytic aluminum enterprises to develop high
technology and realize industrialization.
In the market competition, the technological innovation of electrolytic aluminum
enterprises is related to their survival and development. In a narrow sense, it refers
to the proposal and development of new products and new technologies. In a broad
sense, technological innovation refers to the innovation process of an enterprise.
The idea of new products or new technologies is put forward by the enterprise.
After research and development, industrialization and commercial production are
realized and successful in the market. The product is the symbol of the enterprise,
and the popularity of the product in domestic and foreign markets is the main sign
of the market competitiveness of electrolytic aluminum enterprises.
In the meantime, product technology innovation cannot leave the improvement
of craft and method. The production process is the general flow and method of
manufacturing products in electrolytic aluminum enterprise. Workers use production
equipment to process raw materials, parts, or semi-finished products in specific
production links. The innovation of the production process and operation method
requires not only changing the process and specific method of product manufacturing
on the basis of equipment innovation, but also continuously researching and improving
the specific operation technology and adjusting the process sequence to make the
production process more reasonable. Its means mainly includes two aspects: First,
advanced science and technology are used to transform and renovate the original
equipment, extend its technical life or improve its efficiency; the second aspect is
to replace the old and backward machinery and equipment with more advanced and
economical means of production, so that enterprise production is based on more
advanced materials.
Management Innovation
In the era of knowledge-based economy, enterprise management should make new

changes and combinations in terms of quality and quantity of various functions of
enterprise production factors, so as to create a new and more effective resource
integration system. According to professor Mingjie’s point of view, organization is
the form of effective allocation of resources, and the reform of organizational form
can help resources achieve more effective allocation. Therefore, organizational
innovation is part of management innovation. Large and medium-sized electrolytic
aluminum enterprises should not only carry out industrial management innovation
from the aspects of resource management, operation mode, sales means, investment,
and financing, but also introduce organizational innovation from the aspect of
institutional setup, and use organizational change to help resources achieve more
156
effective allocation. Undoubtedly, organizational innovation also refers to the

change and innovation in production mode and production rental (e.g., assembly
line production technology and flexible manufacturing system). Also, it includes
institutional innovations, such as joint stock companies and group company formation.
Electrolytic aluminum enterprises shall, in different periods, with the changes in
business activities, require the organizational structure to be constantly adjusted,
aiming at more reasonable organizational management personnel and improving
management efficiency. This kind of innovation has important influence on the
deepening reform of Chinese electrolytic aluminum enterprises and the establishment
of a modern enterprise system.
Institutional Innovation
The system is the principle that the organization runs a way to stipulate. The system
innovation is the fundamental factor that the enterprise can develop continuously.
The enterprise system mainly includes three elements: Property rights system,
operation system, and management system.
The property right system stipulates the rights, interests, and responsibilities of
the owners in relation to the most important factors of production for an enterprise.
The management system is the principle of the ownership related to the right of
management and its conditions, scope, and restrictions. It shows the enterprise mode
of operation, to determine: Who is the operator; who is to organize the production data
of possession, use, and the exercise of discretion; who will determine the direction
of enterprise production, production content, and mode of production; who is going
to ensure the integrity of the enterprise production and its proliferation; who is
responsible to the owner of the enterprise production and negative what responsibility.
As the innovation direction of electrolytic aluminum enterprise management system,
it should be the most effective way of using enterprise production data.
Management system is the general term of various specific rules for exercising
the right of management and organizing the daily operation of enterprises, including
provisions for the acquisition and use of various elements, such as materials,
equipment, personnel, and funds. Among the many contents of the management
system, the distribution system is one of the most important. Distribution systems
involve how to properly measure the members’ contribution to the organization and,
on that basis, how to provide sufficient compensation to sustain such contributions
(Lin & Xu, 2015). The laborer is the decisive factor of the efficiency of use of all
the elements of the enterprise; therefore, providing reasonable remuneration to
arouse the laborer’s enthusiasm has very important meaning to the enterprise’s
management. The innovation of electrolytic aluminum enterprise distribution system
157
lies in the continuous pursuit and realization of a higher level of compensation and
contribution balance (Schuler, 1996).
The relationship between the three is complex. Generally speaking, certain
property right systems decides corresponding management system. However,
under the condition that the property right system remains unchanged, the specific
operation mode of the enterprise can be adjusted continuously. Similarly, when the
operating system remains unchanged, specific management rules and methods can
be improved continuously. Once the improvement of the management system is
developed to a certain extent, it will need corresponding adjustments. The constant
adjustment of the management system will inevitably lead to the reform of the
property rights system. Therefore, in turn, changes in the management system will
be counterproductive to the operating system, and changes in the operating system
will be counterproductive to the property rights system. The direction of enterprise
system innovation is to constantly adjust and optimize the relationship between
enterprise owners, operators, and laborers, so that the power and interests of all
aspects are fully reflected, and the role of each member in the organization is fully
played (Xu, Ao & She, 2012).
INFLUENCE OF THE “ONE BELT, ONE ROAD”

STRATEGY ON THE DEVELOPMENT OF
ELECTROLYTIC ALUMINUM ENTERPRISES
Chinese electrolytic aluminum enterprises are facing new breakthroughs in internal

reform and opening up. The strategy of “One Belt, One Road” defines a new
path for opening to the outside world, and lays a foundation for the development,
transformation, and upgrading of electrolytic aluminum enterprises. With the
promotion of the “One Belt, One Road” strategy, going out along “One Belt, One
Road” will become the “new normal” of electrolytic aluminum enterprises’ future
development. “One Belt, One Road” provides Chinese electrolytic aluminum
enterprises with new opportunities as well as challenges.
Opportunities Brought by the “One Belt, One Road” Strategy

for the Development of Electrolytic Aluminum Enterprises
From the international experience, one of the most effective means to reduce
overcapacity is international industrial transfer. This is also an important part of the
process of economic globalization. “One Belt, One Road” is the concept and initiative
of cooperative development. It is to take the initiative to develop the economic
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cooperative partnership with countries along the belt and road, by relying on the
existing bilateral and multilateral system between China and relevant countries and
the existing and effective regional cooperation platform. China said it would first
set up a $40 billion silk road fund to provide investment and financing support for
interconnected projects, such as infrastructure, resource development, and industrial
and financial cooperation in countries along the Belt and Road initiative. It is also
proposed to make breakthroughs in transportation infrastructure to realize the early
harvest of Asian connectivity, and give priority to the development of railway and
highway projects between China and neighboring countries. This is also the beginning
of a new round of market competition. “One Belt, One Road” for the development
of the aluminum industry provides new opportunities.
Data showed that, in recent years, excess capacity has been the development of
China’s “evil” electrolytic aluminum enterprises, but less developed countries are
not saturated. Especially in the “neighbourhood” all the way along the route of the
less developed countries, industry development is not perfect. Transfer of excess
production capacity in China to go to these places, not only helps their development,
but also solves the problems of excess production capacity in China. At the same
time, these trade exchanges are conducive to deepening the economic and cultural
exchanges between China and other countries. Due to the strategy of “area,” all
the way along the country the difference of industrial development is larger. China
can transfer the low-end industries to the relative backward area to absorb excess
production capacity and promote the adjustment of its industrial structure. Besides,
some advantageous industries can be spread to Europe developed areas, and thus
achieve the goal of technology upgrade and access to sales channels. The construction
of infrastructure in countries along “One Belt, One Road” increases the demand
of environmental protection and lightweight. As a light metal, aluminum plays an
irreplaceable role in the development of modern society. In addition to rail transit
use of aluminum profile, automobile use of aluminum is also in great demand. As
the requirement of environmental protection and energy saving becomes more and
more strict, the lightweight of automobiles has become the trend of automobile
development in the world.
The “One Belt, One Road” Strategy Challenges the

Development of Electrolytic Aluminum Enterprises
Chinese electrolytic aluminum enterprises will face various risks and challenges
in the process of going out under the “One Belt, One Road” strategy. From the
perspective of the tax system, many countries have set relatively low tax rates to
attract foreign investment. Chinese enterprises still pay taxes in accordance with
China’s corporate income tax rate when they invest overseas, and they cannot enjoy
159
the preferential tax rates abroad. In terms of politics, some countries along the Belt
and Road have low political stability and irregular political rule, which is easy to
bring political risks. From the perspective of economy, each country has different
degree of exchange rate fluctuations, and investors have certain risks. In addition,
the existing pollution problems in the aluminum industry need to be properly solved.
The aluminum industry’s output should also include low-energy materials and clean
production, as well as innovative green and environmental technologies. The launch
of the latest atmospheric emission standards will spur aluminum enterprises to move
towards green, low-carbon, and efficient production.
China’s aluminum processing industry still has the characteristics of being weak
at both ends and over in the middle, that is, the product varieties, quality, and output
of high-value-added and high-technology aluminum deep-processing materials
are seriously insufficient. For aluminum enterprises seeking development abroad,
they should be aware of the disadvantageous institutional and cultural environment
for enterprise development, and consider the advantages and disadvantages
comprehensively from the perspective of the whole. Countries along the Belt and
Road differ in their resources endowment, stage of development, and environment
for development. However, their economies are highly complementary to each other,
and there is great room and potential for future cooperation. We will adhere to the
principle of enterprises and market orientation, strengthen coordination, improve
the service guarantee system, effectively combine China’s industrial and financial
advantages with the needs of the host countries, and vigorously promote international
cooperation in production capacity and equipment manufacturing.
Key to the Integration of Electrolytic Aluminum

Enterprises Into the “One Belt, One Road” Strategy
Electrolytic aluminum enterprises, as a key industry integrated into the “One Belt,
One Road” strategy, should take the following factors into full consideration.
First, factor demand, they should find the right investment direction and find out
what “One Belt, One Road” countries need. According to the data, China’s primary
aluminum demand is expected to be 34.7 million tons in 2017, up of about 6.78%.
Global demand for raw aluminum was 62 million tons, up of about 4.8%. With the
continuous development of intelligent automobile and new energy automobile, the
demand of international high-end automobile aluminum is increasing day by day,
which is expected to become an important growth point of aluminum demand in
the future.
Second, they should establish extensive cooperation mechanisms. At bilateral
and multilateral levels, China has signed relevant documents on production capacity
cooperation with Kazakhstan, Malaysia, and more than 30 countries along the Belt
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and Road. China actively participates in and leads regional cooperation, promotes the
issuance of the important document of Chinese-Asian joint statement on production
capacity cooperation, and speeds up the formation of an open, inclusive, and win-win
cooperation pattern. Today, on the outskirts of the northern city of Pavlodar, a Kazakh
electrolytic aluminum plant which is financed by China nonferrous corporation and
built by China color corporation, is the country’s first.
Third, they should continue to improve the support system. We will give full
play to the role of policy, development, and commercial finance, launch and set up
financial platforms, such as the production capacity cooperation fund, encourage
various financial institutions to support production capacity cooperation projects
in various ways, and provide strong support to electrolytic aluminum enterprises
in carrying out production capacity cooperation. In order to gradually improve the
investment environment, China should constantly deepen the reform of “streamlining
administration, delegating power, delegating control, and optimizing services,”
improve the facilitation and standardization of enterprises’ outbound investment,
urge enterprises to abide by the laws and regulations of the host country, and guide
enterprises to actively fulfill their social and environmental responsibilities.
CONCLUSION
Collaborative innovation is an effective means to solve the practical problems Chinese

electrolytic aluminum enterprises face, especially under the condition that the “One
Belt, One Road” initiative is proposed and warmly responded by most countries
in the world, which provides broader space for the development of collaborative
innovation in China’s electrolytic aluminum industry. Although China’s electrolytic
aluminum industry will encounter many difficulties on the way forward, with the
development of collaborative innovation and the promotion of the “One Belt, One
Road” initiative, the collaborative innovation of China’s electrolytic aluminum
industry is bound to usher in a brilliant future.
161
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162
Section 3
Regional Case Studies
Under the Belt and Road
Strategy
164
Chapter 10
Making Use of Geographic
Advantage:
Building “One Belt One Road” Vital City
Ping Zhou
Zhanwen Zhang
Siwei Sun
Xi’an Jiaotong-Liverpool University, China
ABSTRACT
The “One Belt One Road” strategy has been fully implemented since 2016, and
the unlimited potential of Macau needs to be developed. The excellent geographic
location enables Macau to be a significant geographic node on the maritime silk
route; the internalized business regulation and advantages in talent enables Macau
to be a significant regulation node of system ensuring the operation of the policy
“One Belt One Road”; the advantages in political aspect enables Macau to be a
significant financial node of the process of “One Belt One Road” financing and
management.
INTRODUCTION
For Macau, being enrolled in the program of One Belt One Road creates a significant
opportunity to develop the economy and society. During the visits to central Asian
and Southeast Asian countries from September to October 2013, President Xi Jinping,
DOI: 10.4018/978-1-5225-8440-7.ch010
Making Use of Geographic Advantage
the president of the People’s Republic of China proposed two initiatives called
the silk road economic belt and the 21st century maritime silk road and appealed
countries to establish and cooperate together, which received high attention from
the international community (Ferdinand, 2016). Actually, the “One Belt And One
Road” strategy are formally named and proposed by Premier of the state council
of the People’s Republic of China, Li Keqiang. He suggested to pave the maritime
silk road for countries of ASEAN and create the strategic fulcrum for development
of hinterland on the Sino-ASEAN expo in 2013. Accelerating the development of
One Belt And One Road can be regarded as a great project, not only promoting
economic prosperity and deepen regional cooperation among countries along the
belt and road, but also enhancing exchanges and mutual learning among different
civilizations and promoting the peaceful development of all countries in the world
(Lo, 2015; Swaine, 2015). In March 2015, the national development and reform
commission, the ministry of foreign affairs and the ministry of commerce jointly
put forward the announcement named “the vision and action of Promoting the
construction of the Silk Road Economic Belt and the 21st Century Maritime Silk
Road” (hereinafter referred to as the” vision and action “) and state council released
to the public. Macao has been an important node city of China’s “maritime silk
road” since ancient times, and it is a natural bridge connecting China’s inland and
overseas countries. 1 In particular, compared with mainland cities, Macao has many
advantages such as beneficial geographical location, culture2, and economic system
and political system.
THE VISION OF PARTICIPATING IN “ONE BELT ONE ROAD”
As a national top-level design, “One Belt One Road” will help Macao gets rid of
excessive dependence on gambling industry and better develops Macao’s business
service platform, featured financial industry, cultural industry, tourism, hotel, cuisine,
etc. As early as 2001, Edmund Ho, chief executive of the Macao special administrative
region, put forward the industrial policy of “enhancing the leading role of tourism
and gambling industry and service industry, promoting the coordinated development
of all kinds of industries” in his command paper. In particular, according to the
data of Macao’s statistics bureau, Macao’s gambling industry experienced negative
growth for the first time in 2014, which made the danger of excessive dependence
on gambling suddenly appear and the call for promoting the diversified development
of Macao’s economy and industry is stronger than before. Therefore, Macao should
take advantage of the “One Belt One Road” and follow the trend to inspire new
industry leaders, adjust the direction of capital use and talent cultivation, so as to
play a role as the bridgehead or node city in the new pattern of “One Belt and One
165
Road”. Additionally, it also should seek for a new breakthrough and growth point
for the diversification of Macao’s economic structure and the integration of China’s
economy and global economy.
In 2014, the Macao submitted to the central government of China the text of
“Suggestions on Macao’s participation in the national 13th five-year plan”, which
clearly expressed Macao’s willingness to participate in and integrate into the
construction of “One Belt and One Road”. It was also clearly stated in the 2015 policy
address of the Macao SAR government that “Macao will commit to the construction
of ‘One Belt One Road’ and strengthen economic and trade exchanges and cultural
exchanges with ASEAN countries.”1 ” In March 2015, Macao was approved to be
included in the “One Belt And One Road” strategy by the central government. Mr.
Shian Chui, the present chief executive of Macao declared that the government
of the Macao special administrative region would attach great importance to and
cooperate with central government to make efforts to carry out a series of detailed
actions to support the implementation of the vision and action in building the silk
road economic belt and the 21st century maritime silk road.
UNIQUE ADVANTAGES OF MACAU
An Important Geographic Node City
Tracing back to history, hundreds of years ago, Macau was an important node of the
significance and exportation trade of Maritime Silk way of China. Macau’s unique
geographical location and its close personal and economic resources along the “One
belt one road” regions and nations have determined that Macau has an important
geographic node function in the Maritime Silk Road’s construction. Judging from the
overall strategic layout of the planning of the central government, the starting point
of the “One belt one road” is the prosperous Asia-Pacific economic circle, which
is centered in the Central Asian Economic Circle, the South-West Asian Economic
Circle, the African National Economic Circle, and the Eurasian National Economic
Circle. Get into the European countries’ economic circle with the most excellent
economic growth. It can be considered that the middle realm of the “One belt one
road” is an economic gloom, and there will be much room for improvement in its
evolution phase and resources; the two ends of the “One belt one road” strategy being
pushed by the multinational societal economy’s two prime engines. It can supply
tremendous economic growth momentum and create more evolution possibilities.
As far as Macau is concerned, starting from the Asia-Pacific economic circle and
contacting the European economic circle closely, its strategical place can play a
bridge function and we need to concentrate on growth. “One country two systems”
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policy has given a unique mileage to Macau, which has enabled Macau to have a
higher level of open and liberal economic system on a worldwide scale. Coupled
with historical accumulation, Macau has turned into a model for the convergence
of West and East. Macau’s international business rules and the cultural condition
of West and East integration are favorable at the same time. In the collection of
passenger flow and talents, capital flow, information flow and other resources in
Macau, the Macau economy will be upgraded to a novel degree.
System Node of “One Belt One Road”
In economic and trade exchanges with Western nations, Macau owns the benefits
of the international business network, international talents, and capitalist economic
system. This possesses a significant role for the Chinese central government to evade
Western countries’ ideology, the barriers to high-tech, to create an international
business environment, and to cultivate international talents. It will make a system
node of the One belt one road for Macau “. We have seen that although the “One
belt one road” strategic concept has been widely endorsed by the international
community as a whole, a number of countries yet have some uncertainties about the
factual implementation of China’s “One belt one road”. For instance, within the EU,
“China is managing to use the new Silk Road to carry capital exportation, resource
development, and merchandise expansion out to Central Asian countries.” There
is also a Western public opinion that “One belt one road” Initiative may make for
China increase its erosion of the European market and The international status of
Europe poses a threat. “In August 2014, the” Asian and Asian Academic Research
Associations’ International Federation “was built in Ulaanbaatar by American
countries and European. It is headquartered in Europe and has an Asian branch in
Mongolia. And this will exclude the participation of China completely. A number
of countries even compare China’s “One belt one road” strategic concept with
the “Marshall Plan” that the United States brought in in the past. It has had good
cooperation with Western countries since the opening markets of Macau from 480
years ago. The “One belt one road” strategy through Macau to connect European
countries and Asia-Pacific countries can dilute ideological conflicts and help the
mainland of China better integrate with the international community. Macau has
exerted the institutional advantages of “one country, two systems” and its good
past relations with Western countries, helping eliminate the misunderstanding of
the “One belt one road” the above-mentioned countries’ strategy and promoting the
implementation of the “One belt one road”.
167
Internationalized Business Rules and Internationalized Talents
The operating costs of the implementation of the “One belt one road” strategy can
be reduced by Macau’s international system and business rules. Chinese companies
may go abroad because they are not familiar with international business rules and
bear large commercial risks in trade and overseas investment. A lot of multinational
projects may be stranded in the middle, which will increase Chinese companies’
transaction costs greatly in overseas distribution. Macau has rich experience in
international trade, has always followed international business operations’ rules,
and has maintained close cooperation with American countries and European for
a long time. It has attracted a lot of multinational companies to set branches up in
Australia, which has a solid economic foundation and reserves a number of talented
people. In the future, the implementation of the “One belt one road” in Eurasia’s
countries will require mainland enterprises and Macau to carry effective and deeper
integration and grafting in the aspects of business rules and international systems out,
and assist mainland enterprises to take risks in foreign investment and make up for
them. The shortcomings in Chinese enterprises’ process going global and improving
mainland enterprises’ comprehensive competitiveness in foreign investment. Macau
can also provide the implementation of the “One belt one road” initiative with
international talent. Macau has professional and high-level talents who are familiar
with international rules and have competitive advantages in finance, law, consulting
and accounting. Compared with the mainland, Macau’s professionals have a high
level of advanced international concepts and foreign language generally. Elites and
professionals participate in the “One belt one road” foreign negotiations, which can
help to resolve international trade frictions (such as anti-dumping). Disputes, at the
same time, can represent China in international organizations, etc., which will provide
a strong talent guarantee for the implementation of the “One belt one road”. It can
be said that the promotion of the “One belt one road” Initiative requires an elite’s
cultivation with a national consciousness, global vision, pioneering capabilities
and innovative thinking. The young elites rooted in Macau and have the mainland’s
in-depth understanding and have global thinking will become the mass base for
Macau’s upgrading and industrial transformation. This group of Macau will also
open its gain experience and horizons during the implementation of the “One belt
one road” initiative.
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Featured Financial Node
In the “One belt one road” strategy, the financial instruments are relying on the
Asian Infrastructure Investment Bank, the BRICS Bank, the $40 billion Silk Road
Fund and the proposed SCO Bank. These four institutions are known as the “Four
Big Funds” of the “One belt one road”. The efficient operation of these financial
institutions also requires the cooperation and support of Macau. Compared with the
developed European and American financial markets, the financial markets of Asian
countries are not developed to a high degree, and the degree of financial integration
is lower. Due to differences in legal, administrative and regulatory mechanisms, the
flow of resources between economies has been greatly limiting.
The business of the “Four Major Funds Pool” of the “One belt one road” initiative
will also face competition and boycotts from ADB and the World Bank. The “four
major fund pools” will have a long history from negotiation, signing, preparation to
high-efficiency operation. The accumulated successful experience in the financial
sector in Macau, the financial services professionals, and the evolution of financial
products in the early stage can provide strong support for the efficient operation of
the “Four Capital Pools”. The Chinese government will also use the “One belt one
road” opportunity to carry out various economic and trade settlements, construction
financing and RMB investment with the assistance of Macau, thus accelerating the
internationalization of the RMB. Macau’s active integration into the “One belt one
road” construction is also conducive to promoting the internationalization of the
RMB. For example, there are currently 29 banks operating in Macau, including
mainland China, Taiwan, Singapore, the United States, the United Kingdom, and
Portugal. Macau has also actively expanded cross-border financial services and
further strengthened its financial links with the Mainland. Macau’s renminbi deposits
accounted for 10% of total Macau’s total deposits, and cross-border renminbi trade
settlements grew more rapidly. Cross-border renminbi trade settlements completed
in the first half of 2015, a year-on-year growth rate of 52%.
FEASIBILITY MEASURES AND IMPLEMENTATION

RECOMMENDATIONS
The “One belt one road” strategy has been rolled out gradually in 2015, and a series
of usable projects will be introduced one after another. It can be said that the “One
belt one road” is a major strategical arrangement for China to adjust to the new
modifications in the global economic development pattern, international and domestic
overall situation of coordinate China, and focus on fostering new benefits in long-
169
term international economic competition. This will be China’s promotion of a new

round of extraneous reforms. A major platform for openness. In the grand strategy
and great tendency of China, Macau should, therefore, make use of the tendency,
comprehensively, actively and join in the formulation deeply and implementation
of the “One belt one road” plan, and suppose geographical nodes, finance, and
institutional nodes. The node’s important aspects.
Actively Integrate Into the National Strategy to Achieve a

Seamless Connection Between the System and the System
In “Action and Vision”, the cooperation mechanism was explained by the central
government. “Reinforcing policy communication is an important commitment for
the construction of the” One belt one road “. Reinforcing inter-governmental co-
operation, establishing exchange mechanisms and multi-level inter-governmental
macro-policy communication actively, and increasing interests. Integration, boost
political mutual trust and achieve an advanced consensus on cooperation. Nations
along the route can fully exchange and coordinate countermeasures and economic
growth strategies, formulate measures and projects jointly for promoting regional
cooperation, negotiate and resolve problems in cooperation, and apply large-scale
projects and pragmatic cooperation together. Supply policy protection. To this end, in
the top-level system’s design, its own functions should be better defined by Macau in
the “13th Five-Year Plan” of the central government, so as to share the development
achievements of comprehensive deepening reform of China. On the other hand, In
terms of specific implementation, we can refer to international standards, formulate
cooperation plans with Guangdong in the form of pre-entry national treatment plus
negative list, and step the development and cooperation up in Nansha, Qianhai, and
Hengqin to create a high-standard Guangdong-Hong Kong-Macau free trade zone.
At the same time, Action and Vision proposed “to strengthen bilateral cooperation,
carry multi-level and multi-channel communication and consultation out, and promote
bilateral relations’ all-round development. Promote the signing of cooperation
plan or a cooperation memorandum and build a number of bilateral cooperation
demonstrations. Establishing and improving the bilateral joint working mechanism,
with the study and implement the action roadmap and implementation plan is all
service for the construction of the “One belt one road”. It is predicted that giving
full play to the bilateral committees, mixed committees, association committees,
steering committees, management committees, and other bilateral mechanisms to
coordinate and promote cooperation implementation. Supporting local people to
explore the cultural and historical heritage on the “One belt one road” is one of
the aims. At the meantime, organizing trade and cultural exchange activities for
170
investment is beneficial for the Silk Road International Cultural Expo, the Silk
Road International Film Festival, and the Book Fair, for instance, the activities like
supporting to found the “One belt one road” International Summit Forum. From
this, we can see that there are a large number of jobs Macau can carry through. By
embedding the national grand strategy completely and exerting its own advantages
fully, Macau merely has the opportunity to begin to be an indispensable economic
node in the promotion of the “One belt one road”; and only by implementing the
mechanism in a down-to-earth manner can the economic node’s function be effectively
utilized. To turn theoretical thoughts into reality.
Using our Advantages to Establish Close Cooperation

Mechanisms With Mainland Financial Institutions
In “Vision and Action”, in terms of financial resources, it is clearly stated that the
financial financing is an important support for the implementation of the “One belt
one road” strategy. “Deepening financial cooperation, promoting the construction
of Asian monetary stability system, investment and financing system and credit
system. Expanding the scope and scale of bilateral currency swaps and settlements
along the line. Promoting the opening and development of the Asian bond market.
Promoting the Asian Infrastructure Investment Bank, The BRICS Development Bank
is preparing for construction, and all parties concerned will hold consultations on
establishing a financing organization for the Shanghai Cooperation Organization.
Accelerate the establishment and operation of the Silk Road Fund, and carry out
multilateral financial cooperation through syndicated loans and bank credits, etc.
Support the governments along the line and the higher credit rating. Enterprises
and financial institutions issue RMB bonds in China. Eligible Chinese financial
institutions and enterprises can issue RMB bonds and foreign currency bonds abroad,
and encourage the use of funds raised in countries along the route.” “One belt one
road” construction requires a lot of money, the future in 10 years, China’s total
investment in the “Belt and Road” will reach 1.6 trillion US dollars. To this end,
Macau’s financial advantages should be fully utilized to assume the corresponding
functions of financial nodes. In addition to the general requirements of the top-level
design and implementation mechanism, it is also necessary to strengthen the close
cooperation mechanism between Macau and mainland financial institutions, so that
Macau funds can enter and leave the Mainland relatively loosely. Macau’s financial
institutions and financial talents can touch the “One belt one road” in practice. “The
investment project.” In this regard, Macau should actively promote the depth and
breadth of financial market development, optimize the cooperation mechanism with
mainland financial institutions, so that Macau funds and talents can participate in
171
the country’s “One belt one road” investment and financing activities, and integrate
into the AIIB. In the preparatory activities of financial institutions such as the Silk
Road Fund, this will strengthen the role of the national foreign investment strategic
contact.
Fully Explore the Inherent Advantages of Business

Nodes With Portuguese-Speaking Countries
Based on the historical connection between Portugal and Macau, Macau should give
full play to economic and trade links’ position with Portuguese-speaking nations. As
early as 2003, Macau established the Permanent Secretariat of the China-Portuguese-
Speaking Countries Economic and Trade Cooperation Forum. The forum’s main
objective was to push the economic and trade development between the Portuguese-
speaking nations and China. In November 2010, Premier Wen Jiabao of China’s
State Council arrived in Macau and attended the third ministerial meeting of the
“Chinese-Portuguese National Development Forum” and delivered an important
speech, proposing a series of measures to promote Macau as a platform for China-
Portugal economic and trade cooperation. With the “Chinese-Portuguese National
Development Forum” as the medium, Macau plays an increasingly significant role
in promoting economic and trade cooperation with Portuguese-speaking countries.
Now, China’s economic and trade exchanges with Portuguese-speaking countries
are progressively close, and there is likewise a huge need for relevant financial
services. Macau can play a platform role in providing the multilateral economic
and trade development of Portuguese-speaking countries and China with financial
services. There are differences in economic evolution between Portuguese-speaking
nations and China. The trade complementarity effect that is brought about by this
difference is apparent. Reinforcing economic and trade exchanges can create more
opportunities for economic development. Tangible benefits will be also gained
by Macau by playing a platform role. For instance, for the Chinese mainland, the
Portuguese Capital Bank and a long time have a substantial market share in the
banking industry. Various cooperation agreements have been signed by Chinese
banks with the Portuguese-speaking national financial institutions through financial
institutions that were based in Macau. The financial industry has been promoted by
these measures in Macau for further development. Macau can also serve as a business
node for Portuguese-speaking countries. Macau can play a role as a node that connects
Portuguese-speaking countries’ renminbi market: one is to realize the circulation of
RMB funds that are required for trade’s settlement in two markets, and the other is
to realize financial products’ interoperability between the two markets. Through this
connection, not only can the circulation efficiency and use of the renminbi in the
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Portuguese-speaking countries be enhanced, but the renminbi’s internationalization

can be further promoted. It ought to be pointed out that Portugal has turned into a
hot spot for Chinese investment. Following a report by the American News Agency
on March 2, 2015, as stated by the latest statistics, Portugal has been the fourth
biggest Chinese investment destination country in Europe in the past decade, and
its ranking is higher than that of European countries like Germany. Statistics reveal
that in 2014, China’s investment in Europe totaled 18 billion US dollars, doubled in
2013. Among them, the investment amount to the United Kingdom was 5.1 billion
US dollars, Italy’s 3.5 billion US dollars, and the Netherlands 2.3 billion US dollars.
During the period, Portugal absorbed a sum of US$2 billion in investment funds
from China, ranking fourth, and Germany, which graded fifth, absorbed US$1.6
billion. It can be seen that the integration of Macau into the “One belt one road”
will also help to increase international investment in Portugal.
Strengthen Cooperation With Hengqin Free Trade

Zone, Guangzhou, and Other Regions to Break
Through the Restriction of the Narrow Region
“Action and Vision” puts the advantages of Macau, Taiwan, and Hong Kong forward
clearly. Leverage the role of Guangzhou Nansha, Zhuhai Hengqin, Shenzhen Qianhai
and other open co-operation zones, can deepen cooperation with Macau, Taiwan
and Hong Kong, also build Guangdong, Hong Kong and Macau Dawan District,
with Strengthening Shanghai, Tianjin, Guangzhou, Shenzhen, Zhuhai, Zhanjiang,
Shantou, Xiamen, Haikou Construction of coastal cities such as Sanya, we reinforce
the Guangzhou International Hub Airport’s function. To expand the blooming and
deepen reforms, governments innovate the mechanism and open economic system,
increase technological and scientific innovation, and form a new advantage of
leading the competition and international cooperation and participating in (Liu, et
al., 2018). All the way the vanguard and principal force are in the construction of
the 21st Century Maritime Silk Road. We will especially give full play to overseas
Chinese’s unique mileages and the particular administrative areas of Macau and
Hong Kong, and participate in activities and contribute to the construction of the
“One belt one road”. Macau is limited by geographical area.
The development opportunities should be expanded by more actively in Hengqin
New District. For instance, Macau’s Hengqin New District in Zhuhai already has
a Chinese medicine park and a university campus with 1.09 square kilometers.
This cooperation with the mainland and Hengqin can be further deepened. Zhuhai
Hengqin New District is an active exploration of cooperation’s new model between
Guangdong, Hong Kong, and Macau. Macau can invest in the construction of
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exhibition venues and other public infrastructures direct and integrate into the
construction and development of Hengqin New District in Zhuhai. To undertake
more work for the resource sharing, common development, and interconnection
of infrastructure in Macau and Zhuhai. The “One belt one road” encourages the
development of various free trade zones (Du, 2016; Du & Zhang, 2018). In 2015,
Hengqin New District had been included in the Guangdong Free Trade Zone’s scope
and is the most important. The Guangdong Free Trade Zone was renamed from the
Hong Kong, Macau Free Trade Zone and original “Guangdong”. The advantage
of strengthening Guangdong’s local advantages and relying on Guangdong is
emphasized. This is obviously the new realm of the “Hong Kong, Macau Free Trade
Zone and Guangdong and the Central Government”. At present, the Macau economy
is more advanced than Guangdong, but from the perspective of international vision
and long-term development, and Guangdong’s local advantages exceed Hong Kong
and Macau will be the general trend. The free trade agreement signed between
China’s domestic free trade zone and countries along the “One belt one road” will
be internal and external, and will play an important role in promoting the economic
integration of the Eurasian continent, thus having an important impact on the current
global economic landscape. Therefore, as an important node city in the “One belt one
road” pattern, Macau should actively expand and deepen cooperation with Hengqin
New District, Guangdong, and the mainland provinces and cities. This will not only
benefit the diversified development of the Macau economy but will also expand the
broader geographical space for Macau’s economic development.
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REFERENCES
Du, J., & Zhang, Y. (2018). Does one belt one road initiative promote Chinese
overseas direct investment? China Economic Review, 47, 189–205. doi:10.1016/j.
chieco.2017.05.010
Du, M. M. (2016). China’s “One Belt, One Road” initiative: Context, focus,
30–43. doi:10.1163/23525207-12340014
Ferdinand, P. (2016). Westward ho—the China dream and ‘one belt, one road’:
Chinese foreign policy under Xi Jinping. International Affairs, 92(4), 941–957.
doi:10.1111/1468-2346.12660
PMID:29301304
Lo, C. (2015). China’s Silk Road Strategy. Inter Economics, 29(4), 54.
Swaine, M. D. (2015). Chinese views and commentary on the ‘One Belt, One
Road’initiative. China Leadership Monitor, 47(2), 3.
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Chapter 11
Belt and Road Initiative:
The Case of Malaysia
Teo Poh Chuin

Tunku Abdul Rahman University College, Malaysia
ABSTRACT
With the aim of the Belt and Road Initiative in search of synergies with participating
countries, infrastructure development projects are expected to arise incrementally
and will be adapted accordingly to fulfil local regulatory requirements and needs.
Malaysia embraces opportunities brought by the Belt and Road Initiative by
penetrating deeper into overseas market with the availability of rail lines that will drive
connectivity and foster economic growth. The potential of the Belt and Road Initiative
lies not just within the infrastructure sector, but also offers plenty of opportunities
for human capital development, which made available through technology transfer
and knowledge sharing arising from the cooperation between China and Malaysia.
While it is believed that Malaysia will experience a strong growth, this motion
definitely requires a high level of mutual cooperation, understanding, and trust in
managing regulatory, political, and financial risks, as well as challenges involved.
INTRODUCTION
President Xi Jinping’s Belt & Road Initiative’s (一带一路), a key element of China’s
21st century diplomacy, clarity of vision, powerful means and combining movement,
has created a strong impact on global businesses and international relations (Benjamin
& Viktor, 2017). The overland ‘Belt’ involves the founding of a trade corridor and
economic expansion from the west of China through Central Asia, and finally to
DOI: 10.4018/978-1-5225-8440-7.ch011
Belt and Road Initiative
Europe; whilst, the maritime ‘Road’, China’s development of hubs and ports across
the Indo-Pacific is a main aspect of this initiative (The Economist, 2017).
Even though the underlying concept, scope and framework of the Belt & Road
Initiative seem vague in nature, it has since gathered notable influences by positioning
itself as an enormous and comprehensive infrastructure development programme
based on the utilisation of China’s massive economic leverage abroad and exports
of its strong capabilities to other regions in the infrastructure development area
(Lehmannet et al., 2016). Formally, the Belt & Road Initiative covers five key
areas of cooperation comprising hammering infrastructure and facilities networks,
improve financial cooperation, coordinating development policies, strengthening trade
relations and investment and intensifying cultural and social exchanges (Benjamin
& Viktor, 2017).
Even though it is believed that the Chinese companies will be the big winners
from the Belt & Road Initiative, but non-Chinese companies are also increasingly
seeing themselves benefiting from this initiative. President Xi hopes to find a more
profitable venture for China’s vast foreign-exchange reserves, which are presently
interested in low-interest-bearing American government securities (David, 2017).
Besides, he also hopes to establish a new market for Chinese companies, such as the
high-speed rail firms, as well as to export some of China’s vast excess capacity in
steel, cement and other metals. Apart of giving an overview on the Belt and Road
Initiative, this study also discusses the opportunities and challenges in the context
of Malaysia.
BACKGROUND OF THE BELT AND ROAD INITIATIVE
Conceptualization
Prior of the introduction of the overarching term ‘One Belt, One Road’ or also
known as the ‘Belt & Road’ (or ‘B&R’) – an initiative that could reshape the world
order potentially, Xi Jinping, the China’s president announced two major initiatives
which are the land-based ‘Silk Route Economic Belt (SREB)’ and the ocean going
‘Maritime Silk Road’ in 2013 (Leer & Yau 2016; Lehmann et al., 2016). Figure
1 illustrates the Silk Route Economic Belt and the Maritime Silk Road under the
Belt & Road Initiative.
The primary objective of the Belt & Road Initiative is to build a trade and
infrastructure network connecting Asia with Europe and Africa along the ancient
Silk Road trade routes. The ‘Belt’ refers to an infrastructure network of mainly
transport, communication and energy projects stemming from Xi’an in China via
Central Asia to Moscow, Rotterdam and Venice; whereas, the ‘Road’ refers to the
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Figure 1. Silk road and maritime silk road of the belt and road initiative
Source: China Institute of International Studies (2016)
infrastructure network in terms of maritime which comprises of planned ports and

other coastal infrastructure from South China and Southeast Asia to East Africa
and the northern Mediterranean Sea (Lehmannet et al., 2016). As a joint effort
between the National Development and Reform Commission (NDRC), Ministry of
Foreign Affairs and the Ministry of Commerce, the Belt & Road plan was eventually
established (Leer & Yau, 2016).
Scope
China has slowly opened its economy and initiated several internal and external
developmental strategies since its participation into the World Trade Organisation
(WTO) in 2001, and the Belt & Road Initiative is one of the most vital drives toward
its developmental effort (Lehmann et al., 2016). The concept of Belt & Road Initiative
is to build a trade and infrastructure network connecting Asia with Europe and Africa
along the ancient Silk Road trade routes, with the purpose of not only improving the
trade flows, driving long-term economic growth and developments in the region,
which in turn is expected to bring advantages to the economies of countries along
the routes, as well as also offering solutions to the global economic difficulties (Belt
& Road Portal, 2017). In aligning with China’s search for new economic thrust
due to recent slower economic growth, the Belt & Road Initiative is implemented
to structurally solve the problem of weaknesses in both state enterprises and real
estate market bubbles attributed to economic globalization and where growth is now
provided with greater platform to expand due to the Belt & Road Initiative focusing
on infrastructure development (el Namaki 2017).
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In line with the historical framework of harmonious co-existence and mutual

cultural enrichment, the China government introduces the “Five Principles of Peaceful
Coexistence” as fundamental values of the Belt & Road Initiative (Barcelona Centre
of International Affairs, 2016). These five principles are:
1. Mutual respect for each other’s sovereignty and territorial integrity;

2. Mutual non-aggression;
3. Non-Interference in each other’s internal affairs;
4. Equality and mutual benefit; and
5. Peaceful co-existence.
China sees connectivity and co-development as the common interests and keys
to peace and prosperity (Chinese National Development and Reform Commission,
2015). Through the introduction of the Belt & Road Initiative, China strives to
promote Five Connectivities, which are:
• Policy coordination
• Facilities connectivity
• Unimpeded trade
• Financial integration; and
• People-to-people bonds
Although the Belt & Road Initiative is usually referred to as a national vision
and foreign strategy which seems like a conceptual propaganda, in actual fact, it
also involved a series of concrete investments and projects (Leer & Yau 2016).
Thus, a huge series of on-going, planned and future infrastructure projects, which
are accompanied by various bilateral and regional trade agreements are made
available under the initiative of Belt & Road. The focus of these projects is on the
development of a vast array of resources consists of roads, railways, ports, airports,
oil and gas pipelines and refineries, power plants, Free Trade Zone as well as
information technology, telecommunication and financial infrastructure (Leer &
Yau, 2016). Amongst all the projects, infrastructure comprising railways, ports and
roads, together with telecommunications networks receive the most attention (The
Economist, 2017).
Many advantages can be brought by the Belt & Road Initiative and one of them is
the reduction in trade expenses resulted from infrastructure improvement, which also
helps to foster the economy growth and strengthen stability amongst the region as the
inland and coastal China are integrated by setting up land corridors along the major
Eurasian countries, through China-Mongolia-Russia, China-Central and West Asia,
China-Indochina Peninsula, China-Pakistan, and Bangladesh-China-India-Myanmar
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(Lehmann et al., 2016). For instance, companies like BMW and Hewlett-Packard
(HP) are using the Trans-Eurasia Chongqing-Xinjiang-Europe international railway
route, which begins from Chongqing and arises in Duisburg, Germany for a total of
16 days of travel along 11,179 km route. Moreover, the Belt & Road Initiative also
acts as a common platform for economic security in conjunction with the United
Nation’s Sustainable Development Goals by connecting global north to global south
(United Nations, 2017).
Thus, a massive financing commitment and platform are needed to support the
initiative. Indeed, US$1 trillion of outbound financing is expected to be initiated
by the Belt & Road Initiative from Chinese government in the coming 10 years,
either in the form of preferential debt funding or equity funding (Leer & Yau, 2016).
The funding to the appropriate initiatives and projects will be allocated through
specific channels created by the China’s government such as New Silk Road Fund
(NSRF), Asian Infrastructure Investment Bank (AIIB), foreign exchange reserves
and some of its largest state-owned banks. For instance, AIIB is complemented by
the Belt & Road Initiative as an effort in financial development with the purpose
of improving regional collaboration and economic empowerment along with social
changes (Hu et al., 2017).
The trade and exports with China’s neighbours are expected to be stimulated by
advocating the connectivity along the two main routes and the investment across
the continents, in which the new market will be opened through the Belt & Road
Initiative, and the issues of China domestic overcapacity can be resolved particularly
in terms of construction, engineering and manufacturing capacity (el Namaki, 2017).
With the purpose of seeking market driven collaboration among these countries,
this initiative is also intended to be beneficial to the internationalisation of Chinese
currency Renminbi and the harmonisation of diplomatic relations amongst many of
its neighbouring countries (Leer & Yau, 2016; Lehmann et at., 2016). Hence, it is
important for the Chinese leaders to ensure that peace in its fragile neighbourhood
can be maintained and safeguarded through economic prosperity. The Belt & Road
Initiative is initiated to align with China’s strategic and geopolitical interest in
building a cordon sanitary of regional stability around the country itself.
Involvement of Other Countries
Covering 30% of global Gross Domestic Production and 35% of global trade, the
Belt & Road Initiative encompass more than 60% of the world’s population through
the 71 participating countries are connected in its current shape, and even that China
still welcome other countries that are out of the Belt & Road region to join the forces,
as detailed in the 2017 report of the Malaysia’s Ministry of International Trade and
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Industry. Hence, the current and future participating countries in the Belt & Road
Initiative are estimated to be more diverse and inclusive.
The routes under theBelt & Road Initiative are more alike to a range of network
instead of a fixed route (Mustafic, 2017). The Belt & Road Initiative consists of
two physical routes, a land route and a maritime route that connect China with
Europe, Southeast Asia and Africa region by having numerous side-branches along
the way. The land route is stemming from inner China to Southern Europe through
Netherlands; whilst, the sea route is running from Shanghai’s port through India
and Africa to the end-point of the land-based route in Venice (Leer & Yau, 2016).
The outbound focus of China in three directions is reflected by the Belt & Road
Initiative, which includes West (West China, Central Asia, the Middle East and
Europe), East (Southeast Asia), and South (South Asia and Africa) (Leer & Yau,
2016). As a result, underdeveloped countries will learn from developed countries
through economic globalization and economic integration, China’s outward foreign
direct investment can be promoted overall through reducing the institutional differences
(Gao, 2017). Due to the closer distance to Western China, demand for higher regional
stability and natural resources abundance, Eurasia will be given priority in conjunction
of the initiative, as well as Southeast Asia which will also be prioritized due to its
importance in trading relationship with China (Leer & Yau, 2016).
THE CASE OF MALAYSIA
The Relationship Between China and Malaysia
Malaysia is the first Southeast Asia country establish diplomatic relations with
China (Selat 1987), since the historical visit of its former Prime Minister Abdul
Razak to Beijing in 1974. Malaysia has been attentive to China’s development after
its opening-up process and economy reform. In 2013, the relationship of Malaysia-
China upgraded to “Comprehensive Strategic Partnership.” As expected, Malaysia is
emerging the largest trading partner of China in Southeast Asia where the bilateral
annual trades amounting to US$ 100 billion.
Since the implementation of the Belt & Road Initiative, Malaysia and China
have been reaping the early benefits of economic investment and have pledged to
build a stronger all-round strategic partnership in areas including trade, finance,
military defence, port development, as well as supply chain and logistics. The
Malaysia government has shown its strong dedication and priority in this Initiative
by the establishing Belt & Road Initiative National Secretariat (BRINS) Malaysia
in 2017 in the Ministry of International Trade and Industry, with the objectives to
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coordinate, monitor and facilitate the Belt & Road projects in Malaysia. According to
the Economic Report 2017/18 released in conjunction with Budget 2018, Malaysia’s
annual trade with countries that which run along the Belt & Road exceeded RM850
billion in 2016. With the Belt & Road Initiative, it is expected to increase further
in the coming decades.
In fact, Malaysia has been continuously gaining from China’s economic expansion
(HSBC 2017). Since 2009, China has remained as Malaysia’s largest trading partner
for the ninth consecutive year, and Malaysia’s trade with China has registered a growth
of 20.6% to RM290.65 billion, where exports to China were valued at RM126.15
billion with an increase of 28%, while imports rose by 15.5% to RM164.5 billion
(Malaysian External Trade Development Corporation, 2018). Amongst others, higher
exports were recorded for electrical and electronic products, petroleum products,
rubber products, liquefied natural gas, chemicals and chemical products, optical
and scientific equipments, manufacture of metal as well as natural rubber; whereas
higher imports were registered for electrical and electronic products.
Opportunities for Malaysia
Malaysia’s early embrace of China’s Belt & Road Initiative has led to a flood of
Chinese investments in the country, boosting the Southeast Asian nation’s economy
(Xin, 2017). China has invested more than US$50 billion in the Belt & Road countries
since the initiative was proposed, and has achieved a great number of early harvest
results (Belt & Road Portal, 2017). According to a recent report by the Wharton
School of the University of Pennsylvania, they named Malaysia as the best country
to invest in (Adilla, 2017). Therefore, Malaysia also decided to take the opportunity
by signing agreements with China amounting to RM144 billion, which is a sign of
the great confidence of Chinese investors have in Malaysia (The Star, 2017).
In November 2016, Malaysia and China inked 14 Memorandum of Understandings
worth approximately RM 144 billion. These projects between Malaysia and China
include urban developments and creating industrial parks, generation of power,
upgrading and building new ports, train construction, logistics, investments in
manufacturing plants and even building new rail lines (The Star, 2017). One of the
major deals confirmed was the East Coast Rail Line (ECRL) infrastructure project
amounting to RM 55 billion (South China Morning Post 2016). Supporting this
project is one of the examples of Malaysia welcoming The Belt & Road Initiative.
China’s state-owned enterprise China Communications Construction Co Ltd (CCCC)
will be funding this project together with a soft loan from the Export-Import Bank
of China (The Star, 2017). Figure 2 illustrates the coverage of ECRL project.
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Figure 2. Coverage of ECRL Project

Source: The Straits Times (2017)
Apart of that, Malaysia also signed a contract for the purchase of an initial four
littoral mission ships (LMSs) from China for the Royal Malaysian Navy (RMN)
(Jennings, 2017) which is estimated to provide jobs in both Malaysia and China.
As two of the ships are being built in each country, it would involve a transfer of
technical knowledge to Malaysia as well as safeguarding the safety and security of
Malaysians (The Star, 2017).
Apart from that, Jack Ma, the Executive Chairman of Alibaba and Malaysia’s
former Prime Minister Datuk Seri Najib Razak worked together by launching the
world’s first “Digital Free Trade Zone (DFTZ)” in Kuala Lumpur early 2017 (The
Star, 2017). This will undoubtedly be a catalyst for e-commerce and Small and
Medium-sized Enterprises (SMEs). Najib Razak was positive that the small and
medium entrepreneurs in the country will have the opportunity to access international
markets more easily and increase their business returns (Bernama, 2017). Besides,
Malaysia will also be the premier hub for global and local internet-based companies
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targeting Southeast Asia (The Star, 2017). In addition to shortening shipping times
for key commodities like palm oil and fruits, such network would also allow the
direct transfer of goods between China and Indian Ocean ports in Malaysia, Thailand
and Myanmar (Business Monitor International, 2017).
The largest Business-to-Business agreement signed is the project of developing
Robotic Future City in Johor by Johor Corporation and its Chinese partner Saisun
Robot Investment. This project worth approximately RM 15 billion and involves
the development of 404 ha (hectare) of land to set up the futuristic hub to develop
the robotic industry as well as encouraging and promoting the growth of different
supply chains in Malaysia (The Star, 2017).
Another major deal announced is the Methanol and Derivatives Complex, a project
in Sarawak between Yayasan Hartanah Bumiputera Sarawak (YHBS), Consortium
Huanqiu Contracting and Engineering (HQC) and MacFeam. This project is worth
approximately RM 8.7 billion and will be located at Tanjung Kidurong and comprise
of three plants to be built in two phases. With this project, Sarawak is expected to be
transformed into a petrochemical hub in the region. It is estimated to be completed
in 2021 (New Sarawak Tribune, 2017).
A Memorandum of Understanding to develop the Melaka Gateway project was
also signed between KAJ Development (KAJD) and its Chinese partners Powerchina
International Group, Shenzhen Yantian Port Group and Rizhao Port Group. Under
this project, a total of four artificial islands of reclaimed land will be built, which
include 1) Tourism, Entertainment and Property Development Island; 2) Free Trade
Economic Zone Island; 3) Melaka Gateway Port Island; and 4) Maritime Industrial
Park. Figure 3 illustrate the idea of Melaka Gateway.
Meanwhile, AirAsia, China Everbright Group and Henan Government Working
Group signed a joint-venture Memorandum of Understanding to establish a low-
cost carrier (LCC) terminal in Zhengzhou, capital of Henan province in central
China. The three entities will also set up an aviation academy with the objective
of developing and training talents such as pilots, cabin crew and engineers, as well
as maintenance, repair and overhaul facilities to service aircraft (Reuters, 2017).
Besides, AgroFresh International has secured an approximately RM 6.6 billion deal
with China’s Dashang Group to export Cavendish bananas and tropical fruits to China
(AgroFresh). Also, an engineering, procurement, construction and commissioning
contract was signed between Titijaya Land Bhd and CREC Development to develop
The Shore, a mixed-use commercial hub, in Kota Kinabalu, Sabah. This project
worth approximately RM 576 million, and expected to be completed in four years
(The Star, 2017).
Bursa Malaysia and Shanghai Stock Exchange also signed an agreement to explore
potential ways to improve market accessibility and products in both markets. In
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Figure 3. Graphic of Melaka Gateway

Source: EdgeProp (2016)
addition, a sister port relationship has also been reached between Northport in Port
Klang and Weifang Sime Darby Port in Shandong province of China (Hanif, 2017).
Apart of that, with the aim to further strengthen Malaysia’s leadership in Halal
industry and develop Halal compliance infrastructure in Weifang Sime Darby
port and industrial park in accordance to Malaysia Halal standards, Halal Industry
Development Corporation (HDC) has signed a Memorandum of Understanding
with Weifang Sime Darby Port Co., Ltd. China (WSD) (Ministry of International
Trade and Industry, 2017). The collaboration includes facilitation of Malaysian Halal
products into the Belt & Road connectivity for wider markets reach in Northern and
Western region of China as well as neighboring countries. This joint effort benefits
Malaysian exporters in the form of expanding their halal businesses worldwide.
In addition, Malaysia can also leverage on the Made in China (MIC) 2025
Initiative. In 2015, China has adopted the MIC policy to encourage technological
innovation and enhance competitiveness in the country’s manufacturing sector
where the primary aim of this strategy is to upgrade China into a manufacturing
powerhouse, from a quantity-based manufacturer of quality-driven manufacturing
powerhouse to compete with top-notch players from the United States and Europe,
Malaysia External Trade Development Corporation urges Malaysian exporters to
leverage on this opportunity to export more products to China especially in the
manufacturing sectors given China’s strong motivations to leverage its Belt & Road
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investments in Malaysia for strategic purposes, consistent with the plan’s revitalized
focus (Sophie 2017). Based on the analysis of Malaysia External Trade Development
Corporation, one of the key bottlenecks facing the Chinese manufacturing industry
is in the manufacturing of high-end microchips as MIC 2025 encourages substantial
automation within the manufacturing activities, which drives high consumption of
microchips component, where Malaysian exporters should reap the opportunities in
this sector and boost their exports of components and related materials.
As a result, the Belt & Road Initiative together with the MIC 2025 strategies
will bring an effect where Malaysia has a higher potential to attract Chinese
Multinational companies to grow their business in Greater Kuala Lumpur (GKL),
which is an optimal location in Asia enabling them to leverage GKL as a gateway
into the ASEAN region on the back of 633 million populations, with growing
household income and increasing high standard of living (Sophie, 2017). Besides,
with the rapidly rising labor cost in China and complex consumer demand in Asia
region faced by the Chinese manufacturers, multinational organizations should now
consider setting up their regional business, innovation and talent hubs in GKL as
the principal hub and business hub models for not only facilitate quicker decision
making and optimization of resources but also to offer a cost competitive advantage
with optimal and global levels of operational excellence (John 2017). With the
attraction of Chinese multinational organizations, the domestic transportation will
be enhanced with the projects such as the Melaka Gateway and ECRL, tourism
industry to boost the economic and industrial development whereby promoting
job creation in domestic market where such projects are crucial to works toward
attaining the status of a developed country (Xin, 2017).
Since the implementation of the Belt & Road Initiative, both countries have
reaped the early benefits of economic investment and have pledged to build a stronger
all-round strategic partnership in areas including trade, finance, port development
and logistics. The opportunities for Malaysia to develop the infrastructure and boost
economic growth would not be available if not for the Belt & Road Initiative pushed
forward by China (The Star, 2017). By then Malaysia’s trade figures can jump by
up to three to four folds once Malaysia’s able to export and import goods to the
country’s major trade partners including China, Europe and Middle East overland
via the rail systems and enhance domestic transportation, industrial and tourism
development, thereby promoting job creation (Han, 2017). This would be “win-win
cooperation” between Malaysia and China.
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Problems and Challenges for Malaysia
With the Belt & Road Initiative, each country faces a unique combination of problems
and challenges that are caused by the complexity and extensivity of laws, rules and
regulations shaping the business environment in each country. Amongst the risks
faced by are macroeconomic risks such as unsustainable economic structures and
exchange-rate volatility as well as the microeconomic risks including the social and
political tensions, weak banking sectors, governance failures that are ranged from
corruption to inefficient implementation of reforms (Liu, 2016).
Many of the Western critics have viewed this initiative as China’s desire of
expanding its influence to poor nations hungry for economic and infrastructure
development (Ignatius, 2017). Some of the politicians in Malaysia also questioned its
former Prime Minister Datuk Seri Najib Razak on the signing of certain agreements
and Memorandums of Understanding, which can be interpreted as selling the
sovereignty of Malaysia by agreeing to such projects (The Star, 2017). However, he
claimed that the Belt and Road Initiative serves the purposes of building world-class
infrastructure, bringing more trade and opportunities, improving living standards
and prosperity.
Even though Malaysia companies could collaborate with the Chinese companies,
nevertheless they will also be facing a greater challenge. This is in view that the
competition is keen as many of the companies from the Belt & Road countries will
also be seeking partnerships with the Chinese companies in order to benefit from
the opportunities and over the past decade, many of these Chinese companies have
actually built up strong levels of technical expertise due to their improved economy
and technology and therefore no longer need to partner with international companies
to carry out the business contracts (Business Monitor International, 2017).
It is also difficult to analyse the true state of the initiative as there are misleading
official statistics being made and published. All of these misleading statements
make it hard to assess whether most of the current Chinese investments are in fact
going to these Belt & Road countries or not as compared to the previous years
(Parameswaran, 2017). China, on the other hand, is ensuring the security of these
maritime passageways including the Strait of Malacca and the country also seeks to
extend the reach of the Chinese navy in the regional waters (Pitlo, 2016). If China
attempts to use the initiative to tighten its influence over Malaysia, it could be a
challenge to Malaysia by undermining Malaysia’s effort to maintain a high degree
of independence in its foreign policy while pursuing close economic ties. And if
Malaysia is aligned too closely with China, this would complicate its relations with
the United States (Han, 2017).
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If Malaysia is too dependent on China for economic growth, this might give
China undue leverage in its relations with Malaysia, permitting China to exert greater
pressure on Malaysia to simply go along with China’s strategic interests in the South
China Sea region (Han, 2017). It raises questions about where the relationship is
ultimately headed especially when a bilateral relationship shifts so dramatically,
where China suddenly acquires a monopoly of major infrastructure projects into
Malaysia and when a foreign power makes such rapid political and economic inroads
in Malaysia (Ignatius 2017). This is because Malaysia has benefited tremendously
from the gains in term of trades from the China-driven commodities boom that
drive domestic demand, but as China moves away from a commodity-intensive
investment-led growth model, the whole benefits can be wiped off (Sumathy 2017).
If China attempts to use the Belt & Road Initiative to tighten its influence
over Malaysia, it could undermine Malaysia’s effort to maintain a high degree of
independence in its foreign policy while pursuing close economic ties and if Malaysia
is aligned too closely with China, this would complicate its relations with the United
State, while Malaysia seeks to capitalize on the lucrative Belt & Road Initiative,
then it should be mindful to ensure that it does not serve as a foothold facilitating
China’s ambitions to become a regional hegemon that dominates geopolitics in
Southeast Asia (David, 2017).
The project management and control of the Belt & Road Initiative are basically
in the hand of the Chinese party, which means that all the decision making as
well as resourcing and procurement will be done by China (Malaysiakini, 2017).
This is obvious when it is linked with one of the projects in Malaysia, which is
the ECRL project. In this project, China will use their nationals and materials for
the construction and development rather than give Malaysia the opportunity to
provide all the materials. This was unlike other past national development projects,
where Malaysia’s resources will be given priority when dealing with the needs of
building resources and materials (Free Malaysia Today, 2017). Hence, the Malaysia
government should impose standards such as local content requirements, in which
enforced that a certain percentage of materials must be purchased from local suppliers
or produced by domestic manufacturers, as well as set minimum requirements in
terms of involvement of local workforce in these mega projects.
The Belt & Road Initiative brings a lot of business opportunities to most of
the countries including Malaysia. It advocates to improve international business
opportunities between China and Malaysia. The Belt & Road Initiative provides
a platform for Malaysian SMEs to explore the business opportunities abroad, not
only providing networking platform but also advice on the matters on financial
services, legal services and others. However, at the same time it may also decreases
the business opportunities of SMEs as they opined that they are not able to compete
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with other business that are bigger in size compared with them, hence they might
not be able to seize the opportunity provided by the Belt & Road Initiative, and it
is difficult for them to gain a foothold in the marketplace. SMEs might choose to
exit the market due to the weak competitiveness and not able to afford the required
cost to operate a business.
Also, Malaysia and China are different, culturally, and this does bring impacts to
the business dealings. Greet Hofstede’s five cultural dimensions are being adopted
to analyze the cultural difference between Malaysia and China. Hofstede’s cultural
dimensions theory is a framework for cross-cultural by identifying the effects of
a society’s culture on the values of its members and how these values relate to
behavior of the society in general (Hofstede, 2001). The five cultural dimensions
of Hofstede’s framework includes power distance, individualism, masculinity,
uncertainty avoidance and time orientation. Please refer to Figure 4 for the cultural
distance between China and Malaysia.
Based on Figure 4, China and Malaysia are different in terms of masculinity and
long-term orientation. The Masculinity side of this dimension represents a preference
in society for achievement, heroism, assertiveness and material rewards for success;
whilst femininity refers to a preference for modesty, caring and cooperation for the
weak and also emphasize on quality of life (Hofstede, 2001). According to Hofstede
(2010), with the score of 66, China is a Masculine society which emphasizes on
success is driven; whereas the preference for Malaysia on this dimension cannot be
determined, given a score of 50. Many Chinese would rather sacrifice family and
leisure priorities than to work have proven their needs to ensure success (Hofstede,
2010). This is being influenced by its need for social-ego of work status. And hence,
material reward is appreciated and saving face is extremely important to the Chinese.
Figure 4. Culture index of China and Malaysia according to Hofstede’s Five Cultural
Dimensions
Source: Hofstede Insight (2018)
189
Every society has to maintain some links with its own past while dealing with
the challenges of the present and the future, and this is explained by Hofstede (2001)
in time orientation, which is classified as long-term orientation and short-term
orientation. China scores 87 in long-term orientation which means that it is a very
pragmatic culture. In this society, people show abilities to easily adapt traditions to
change in conditions as well as a strong tendency to save and invest. Additionally, it
is crucial to have thriftiness and perseverance in order to achieve results (Hofstede,
2010). In order to gain and achieve success in life, Chinese people are willing to
persevere and work hard for a long period of time. Chinese people are not so much
about instant gratification.
In contrast, a low score of 41 in long term orientation refers to Malaysia having
a normative culture. People in such societies have a relatively small propensity to
save for the future and that spending money is a more common practice than saving.
Malaysians also wish to make decisions faster in order to achieve more immediate
results and have a great respect for traditions (Hofstede, 2010).
It is important to understand the importance of mutually beneficial long-term
relationships (guanxi) in China. According to Wei et al. (2012), networks could
improve both job performance and personal career growth in China. Thus, having
relationships in place is very critical. As Hofstede and Hofstede (2005) observed,
guanxi lasts a lifetime in China so it would be unwise to waste it on a short-term
objective. To develop relationship and trust before commencing any discussion on
business, managers have to invest a considerable amount of time. Thus, it is essential
to understand that business people in China prefer to establish a strong relationship
before closing a deal by discussing business matters with the Chinese counterparts
(Veras, 2016) as loyalty cannot be built from day one. Therefore, patience is vital
in dealing with the Chinese parties.
In addition, Malaysian managers or companies operating or intend to operate in
China should also emphasize on these emotional and relationship investments and
make their subordinates feel that this company is not just a place where they come to
work but provide them with more than just a workplace such as career prospect and
sense of belonging (Goodall et al. 2007). As mentioned earlier that Chinese people
like to invest in things in a long-term basis, thus it is crucial to ensure durability
and permanence of the products or services offered as these are going to be more
appealing than any short term benefits or pleasure derived (Hofstede 2007).
However, under a long term perspective, China’s massive investment will reduce
the sovereignty of Malaysia, by strangling its own socio-economic development and
lead to a sinicization of Malay Nusantara culture, or known as 中国化Zhōngguóhuà,
according to Embong et al. (2017), a group of professor from the Institute of Malaysian
and International Studies. He also highlighted the concern on the possibly of over-
190
reliant of Malaysia to China, in which Malaysia’s once powerful geopolitical position

of “connecting oceans” will be reduced to just a link to China’s production chain.
Apart of that, Malaysia current Prime Minister Tun Dr Mahathir Mohamad, a
93-year-old leader, who returned for a second stint as premier following a shock
election win in May 2018, has railed against a series of deals struck with Chinese
state-owned companies by the administration of the toppled leader, Datuk Seri Najib
Tun Razak (The Star, 2018). Dr Mahathir had pledged to raise the issue of what he
views as unfair terms and conditions related to some of the deals, and his government
has suspended the China-backed projects worth more than US$22 billion that were
signed under his scandal-plagued predecessor. During his nine-year rule, Najib was
accused of cutting quick deals with Beijing in return for assurance in paying off debts
linked to a massive financial scandal that ultimately brought down his long-ruling
Barisan National coalition, in which fuelling suspicions about Najib’s real motives,
critics said there was often a lack of transparency on the terms, such as interest rates
on loans, which were unfavourable to Malaysia (The Star, 2018). All of these bring
additional uncertainties on the political ties between China and Malaysia, which
potentially affect the inter-country business-related activities.
CONCLUSION
Under the Belt & Road Initiative, the government of China will spur massive
spending on global infrastructure and create abundant of opportunities that assure
the active involvement from both China and foreign firms. Although the initiative
of Belt & Road is being doubted over its overarching and ambitious undertakings
in helping China to attain geopolitical goals by economically connect China’s
neighbourhood countries, there are many factual and concrete objectives implied
that should not be neglected from the perspective of strategy, but instead to embrace
it as a transcontinental infrastructure programme (Wijeratne et al. 2017).
By utilisation of China’s ability in financing projects and leveraging on funding,
industrial goods such as power generation equipment, high-speed railway and
telecommunications infrastructure are going to be employed comprehensively
amongst the countries involved in the Belt & Road Initiative. However, it remains
questionable that the overcapacity problem in China, the lack of political trust and
instability as well as the security threats with some of the Belt & Road countries can
be resolved, as one of the goal and benefits brought by the Belt & Road Initiative is
attributed to the willingness of its neighbours to absorb the excess manufacturing
capacity (Cai, 2017).
191
With the Belt & Road Initiative, there will be a rapid and simultaneous
industrialization and urbanization of the Malaysia economies along the Belt & Road.
Apart from that, by having more transport routes and cargo transport modes, it will
lead to lower transport fares, regionally and globally, and these will be reflected
into the improved operational costs and economic efficiency (Pancea, 2017). Hence,
companies should carefully recognize the difference of various Belt & Road projects
and prepare contingency plans to cope with any short-term disruptions over lengthy
project lifespans while building strong relationships with local authorities to enhance
the chances of success (Wijeratne et al. 2017).
In short, the strategy has a huge potential for integrating Malaysia with the rest
of the world. To achieve this goal, a fine balance must be reached between Malaysia
and China’s interests to develop not only connectivity between the two countries but
also the connectivity between ASEAN member states and the countries included
in the Belt & Road Initiative (Chia 2016). This initiative could draw states together
and promote integration by narrowing space and time. Better connectivity will
enhance Malaysia’s development potential as well as facilitate the diffusion of not
only technology but also of ideas and norms (Pandit & Basu 2014), and Malaysia
could benefit greatly from this transformation.
192
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KEY TERMS AND DEFINITIONS
Ancient Silk Road Trade Routes: An ancient network of trade routes that
connected the East and the West.
Belt and Road Initiative: The Belt and Road Initiative, also known as One
Belt One Road, the Belt and Road, or formally the Silk Road Economic Belt and
the 21st-Century Maritime Silk Road, which can be abbreviated as B&R, is a huge
infrastructure development and investment program introduced by the Chinese
government that covers Europe, Asia and Africa regions.
Cultural Distance: A difference in human values that are rooted in national
culture, which affect individuals’ attitude and behavior.
Economic Globalization: The widespread of international movement of groups,
capital, services, technology, and information that increase the interdependence of
world economies.
Infrastructure: The fundamental physical facilities and organizational system
that needed for the operations of a society.
Investment: Distribution of money in items or projects in the expectation of
benefits in the future.
Small and Medium-Sized Enterprises (SMEs): Sales turnover and number of
full-time employees are the criteria that been used in determining SMEs in Malaysia,
in which for manufacturing sectors, SMEs are defined as firms with sales turnover
not exceeding RM50 million or number of full-time employees not exceeding;
whereas for service and other sectors, SMEs are defined as firms with sales turnover
not exceeding RM20 million of number of full-time employees not exceeding 75.
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200
Chapter 12
Opportunities of
Tourism Development of
Mongolia Under the Belt
and Road Initiative
Huilian Han
Jilin University, China
Hui Li
Jilin University, China
ABSTRACT
The Belt and Road Initiative has had great impact on the countries on the road.
The China-Mongolia-Russia corridor, as one of the six economic corridors, has
seen rapid progress. In the progress, Mongolia not only plays important role as a
bridge, but it actively participates in the initiative. As a leading industry, tourism has
played an active role in Sino-Mongolian cultural exchanges and trade cooperation
and has become a pillar industry in Mongolia. This chapter analyzes the limiting
factors of Mongolian tourism and points out the new opportunities for tourism
brought by the Belt and Road strategy. Though the analysis of the tourism industry
in Mongolia and of the opportunities brought by the Belt and Road Initiative, the
chapter has important practical significance for the investors of China and Mongolia
to correctly understand the Mongolian tourism industry’s development status and
prospects. Thus, they will strengthen the tourism industry cooperation in the future.
DOI: 10.4018/978-1-5225-8440-7.ch012
Opportunities of Tourism Development of Mongolia Under the Belt and Road Initiative
INTRODUCTION
At present, the impact of the international financial crisis has not gone far in Mongolia.
The large reduction in demand for mineral products and low prices have continuously
affected the Mongolia’s economic growth. What is more, the international debt crisis
in 2016 is worse for the Mongolian National Economy. Under this background,
the Mongolian government puts forward the green development idea. It is plans to
vigorously develop agriculture, tourism and manufacturing industries in 2016-2030
to promote Mongolia’s economic development. China has brought great development
opportunities to the countries along the road since it proposed the strategy. As a
leading industry, tourism plays an important role in the process of promoting the
cultural exchange and trade among the countries along the route. Mongolia’s Prairie
Road program and China Silk Road docking brings new opportunities to Mongolia’s
tourism development.
STATUS OF TOURISM DEVELOPMENT IN MONGOLIA
Mongolian Tourism Development Stage
Mongolia is located in the central part of Asia, and adjacent to China and Russia.
Mongolia has 15665 million square kilometers, and is divided into 21 provinces
and one municipality, 342 Soum and 1681 bagg. The total population of Mongolia
reached 3.1209 million at the end of 2016. After the transition of Mongolia’s economy,
Mongolian exported mineral resources to promote economic development, but the
development of tourism was lagging behind. Mongolia is rich in tourism resources,
but mineral development contributes more to the national GDP than other industries.
In 2016, the mining output value was 4808.5 billion Mongolian tugrug, accounted
for 20% of GDP, while the tourism revenue was 247.1 billion Mongolian tugrug,
accounted for only 1% of GDP. Therefore, Mongolia still attaches great importance
to mineral development and ignores the development of tourism. Besides, the
backward infrastructure is also an important factor hindering the development of
tourism in Mongolia.
According to the economic system, the development of Mongolian tourism can
be divided into two stages: tourism of the planned economy and the market economy
period. On the basis of the development stage of tourism is divided into initial stage,
development stage and stable development stage. Tourism in Mongolia is now in
the early stages of the development of tourism. In the planned economy period, the
Ministry of Commerce of Mongolia set up the “Tourist Customer Service Bureau”
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to begin receive foreign tourists. In 1990 the Mongolian tourism market formed
and developed. With the Mongolian economy entering the transition period, the
tourism industry turned to the market, began to operate independently, and got good
development. The Mongolian Tourist Association was established in 1992, and
125 enterprises have joined the association since then. The Mongolian government
headed by Prime Minister Ponzag Zaseri in 1995 promulgated the first file which
concerned about the development of tourism, “Mongolia Tourism Development
Plan 1995-2005” on No.167 Decision, then established the tourism agency under
the basis of the Ministry of Commerce and Industry. In 1996, the tourism industry
was under the jurisdiction of the former Ministry of Infrastructure Development;
In 1998, the government confirmed No.192 Decision to determine the Mongolian
Resolution on Formulating and Developing Tourism Policies. In the same year,
the government adopted the No. 214 resolution in response to the development of
tourism, and established the Mongolian Tourist Information Center. In 1999, Mongolia
joined the World Tourism Organization. In 2004, l “Tourism Information Center”
was abolished, then was established Ministry of Road Transport and Tourism. After
the reorganization of government agencies in 2008, Tourism Management Agencies
were assigned to the Ministry of Nature, Environment and Tourism. In May, 2000,
the state of Mongolia issued the first travel law, the Tourism Law of the Mongolia.
Mongolia’s Great Hural made the 2016-2030 Economic Development Vision
Plan, which centered on the nomadic culture, actively participate in the “Silk Road
Economic Belt” and develop the “Tea Road”. This showed Mongolia’s determination
to accelerate the development of tourism in the market economy system.
Although Mongolia’s tourism industry has entered the market economy period,
Mongolia has proposed relevant policy, resolutions and laws, and established
relevant supporting departments. However, the development of tourism has not
received enough attention under the background of mining-based economy. Tourism
development in Mongolia is still in its early stages.
Resources of Tourism in Mongolia
Resources of the tourism are the object and the foundation of developing tourism
industry. The advantage of developing tourism in Mongolia lies in its abundant tourism
resources. The tourism resources of Mongolia are divided into three categories:
202
Mongolian Natural Landscape
Mongolia belongs to the continental climate, with a wide variety of wild animals and
plants. Mongolia, with vast land and sparse population, has rich natural scenery with
little human intervention and high ornamental value. In addition, Mongolian nature
reserve is also a good place for tourists to travel and sightseeing. Mongolia has not
only the tourist attractions like the Altay Mountains, the Hangai Mountains, and
the Kent Mountain Range, but also has the Leisure tourism Holy Land as Kusugu
Lake, which is known as the “Oriental Blue Pearl”. Mongolian are very respectful
of nature, and have a strong sense of protection of nature. At present, Mongolia has
established more than 40 nature reserves. These are important parts of Mongolian
natural landscape. In a word, Mongolian tourism natural landscape resources are
rich and environmentally friendly.
Mongolian History and Folk Culture
Jiangbo(2013)deems the culture is the soul of tourism, and tourism is the carrier
of culture. Culture is the eternal theme of tourism, the mystical sense of cultural
differences is pursued by tourists, and the culture of the original ecology is more
attractive to tourists. For thousands of years, there have been many ethnic groups
living in this vast grassland. They created a splendid history on this land, then
silently withdraw from the stage of history, and leave a rich and colorful historical
and cultural relics as well as human economic living fossil— “nomadic economy”
culture. The Mongolian nationality has formed a unique national culture in this
long history which becomes a historical and cultural resource of the development
of modern tourism.
Nomadic Culture
Nomadic lifestyle, which is the most suitable way of life on the land, can make full
use of grassland resources. According to Xie Zhiwei(2008),”Nomadic culture is
all tangible or intangible cultural heritage created by the nomadic people and it is
the living fossil of human economic production”. More than half of populations of
Mongolia have been engaged in nomadic herding directly or indirectly. In 2016, the
livestock inventories were 61.549 million, and 341 livestock per capita. Nomadic
herding is the traditional economy of Mongolia and one of the most important pillar
industries. Mongolian mainly adopt the traditional nomadic production mode, and
has maintained a profound nomadic culture foundation in the long-term production
and life. The Mongolian have been procreating for generations, living in harmony
203
with the nature and creating a unique nomadic culture. It is different from other
regions and ethnic groups, and has distinctive features both in terms of its historical
connotation and its extension. Nomadic culture produces products with simple,
aesthetic, original ecological, and attracts tourists from all over the world.
Although Mongolia has beautiful natural landscape, history and folk cultural
heritage, but the tourism development of Mongolia is still faced with poor
infrastructure, lack of distinctive brand and lagging problems caused by the seasonal
characteristics of tourism industry.
LIMITING FACTORS OF TOURISM DEVELOPMENT
The Lack of Unique Brands in Tourist Attractions
Zhao liming et al. (2002) regard as that tourism scenic spot brand refers to the
comprehensive reflection of the terms such as the name and terminology, mark
symbol, actual function, service facility, market development, corporate reputation
and corporate image of the tourist attraction. Mongolia has a unique natural landscape,
historical and cultural resources, which are not only the basis of tourism development,
but also are the important factor of establishing unique brand. Mongolian scenic spots
lack a unique brand. There are several factors restricting the Mongolian tourism brand.
Firstly, Mongolia’s tourism industry starts late, tour operators fail to understand the
core value of tourism brands, and their brand awareness is very weak. At present, the
tourism industry of Mongolia lacks a system. Travel agencies and tourism service
companies are small in scale, with less mutual coordination. Secondly, the tourism
projects of Mongolia is mainly based on natural landscapes. According to a Study
on the Consumption Structure of Incoming Tourists in Mongolia, which conducted
by the Mongolian National Bank and the Mongolian Tourism Center displayed,
36% of Mongolian inbound tourists are for visiting natural scenery, 30% of them
want to experience folk culture, 13% of tourists are interested in Mongolian history,
and 9% of people for adventure tourism. According to the above data, 76% of the
inbound tourists want to visit or experience Mongolia’s natural and humanistic.
The exploration of national history and culture and its connotation are not enough.
The connotation of the history and culture are not explored enough. Thirdly, the
structure of tourism products in Mongolia is single and lacks local characteristics.
Although the tourist products of scenic spot mainly have ethnic characteristics,
they lack products embodying national cultural connotations. Many products are
imported directly or copied abroad, lacking their own national cultural characteristics.
In addition, some products with national characteristics are rough, which cannot
204
meet the needs of tourists and affect the national brand image of tourists. Finally,
Mongolia’s tourism propaganda is not enough. Due to the insufficient funds, the
brand innovation capability of Mongolian tourism enterprises is limited, and brand
promotion is insufficient.
According to the data (shows in Table 1) issued by the National Statistics Office of
Mongolia, the inbound of tourists in Mongolia for official, business and employment
in 2017 accounted for 10%, 34%, and 11.3%, respectively. And 35.2% of the total
visitors were purely for sightseeing, which increased by 3.3%. Compared with 2013,
the number of passengers for official and employment in 2017 declined, but it still
accounted for a large proportion of inbound tourists in Mongolia. As a whole, the
Table 1. The inbound tourist of Mongolia by purpose of visit 2013- 2016 (per 100
people)
Purpose of Visit 2013 2014 2015 2016 2017

Official 26.7 26 20.2 16.8 10
Business 30.7 25.4 32 30.9 34
Tourism 22.4 24.4 25.9 31.9 35.2
Employment 18.2 21.4 16 12.2 11.3
Transit 0.5 0.8 0.2 0.6 0.7
Other 1.5 2 5.7 7.6 8.8
Source: National Statistics Office of Mongolia
Table 2. Number of inbound tourists of Mongolia by countries 2013 -2016 (person)
Annual
2013 2014 2015 2016 2017
Growth*
Total 417815 392844 386204 404163 469309 16.2
China 178326 157561 145029 131312 142481 8.2
Russia 74468 73055 70668 84065 106885 27.2
Korea 45178 45476 47213 57587 74921 30.1
Japan 18178 18469 19277 19985 22519 12.7
America 14701 13987 14420 15859 16667 5.1
Germany 9499 9551 8992 9709 10582 9
France 7407 7733 7989 9026 10038 11.2
United Kingdom 6391 5758 6148 6161 5996 -2.67
Australia 6765 5118 4804 5631 7287 29.4
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number of inbound tourists in Mongolia has a rising trend, and they mainly come
from northeast Asian countries.
Among them, (shows in Table 2)142 thousand tourists comes from China,
accounted for 30.3%, and 10.7 thousand of them are from Russia, accounted for
22.7%. There are also a lot of tourists from developed East Asian countries; such as
Japan and Korea, and less tourists from Europe and America. We can see from the
analysis of the origin and the purpose of inbound passengers, It is shown that the
tourism publicity of Mongolia is not strong enough, and therefore it is not attract
the tourist from developed countries as Europe and the United States. It has limited
the development of Mongolian tourism.
Underdeveloped Infrastructure in Mongolia
The development of tourism is closely related to the infrastructure. The region with
good infrastructure has better opportunity to tourism development. To some extent,
the level of tourism development reflects the level of infrastructure. Because perfect
infrastructure will enhance the tourism development, otherwise it will impede the
development of tourism. Mongolian tourism development is restricted by regional
conditions and economic development, which makes Mongolia difficult to build
infrastructure, especially the infrastructure of tourism industry.
A very important infrastructure for the tourism industry development is
transportation. Transportation is as important to tourism like a person’s meridian.
However, the transportation facilities in Mongolia are relatively backward: is total
existing railway 1815 kilometers, which are broad-gage railway and most of them are
constructed by the Soviet Union. Fan Lijun (2012) stated, at present, in the capital
cities of 21 provinces, only 5 cities in the central and eastern regions have railways.
The rest of the cities are connected by road or air routes.
The infrastructure construction in Mongolia is relatively weak, and the facilities
are not smooth, which restricts the development of Mongolia’s tourism industry to
a certain extent. In recent years, Mongolian government have put forward a set of
projects on infrastructure construction, and have invested a lot of money, but compared
with the other fields of investment, the fund investment in Mongolia infrastructure
construction is still limited. According to Fig 1 and 2, statistics released by National
Statistics Office of Mongolia, Mongolian Civil Aviation Development is limited.
The passengers and freights are mainly carried out by roads and railways, therefore
it cannot meet the service demands of passengers in the peak tourist season.
The service infrastructure of Mongolian tourist attractions is backward, thus as
the accommodation, catering, entertainment and medical facilities of Mongolian
scenic spots cannot meet tourists’ different levels of needs. Statistical data displayed
206
Figure 1. Carried passengers by transportation sector

Figure 2. Carried freight by transportation type

that Mongolia has 3632 restaurants, of which 2167 are in business, 470 are not open,
773 are suspended, 131 are closed which accounted for 59.6% of total. But beyond
that, the safety measures and emergency ability of the scenic area are insufficient.
However, the safety is very important for a tourist, but Mongolian scenic area, lacks
the professional service personnel and rescuers to ensure the tourists safety.
207
Strong Seasonality of Mongolian Tourism
Mongolia is a landlocked country, its climate typical belongs to the continental

climate, and has four distinct seasons. The annual minimum temperature in most
areas is lower than -40°C, and the highest temperature is over 40°C. The seasonality
is mainly reflected in the time distribution of inbound tourists and the tourism
revenues. The winter in Mongolia is relatively long, generally from November to
April of the following year. Spring is from May to June every year, Summer is from
July to August, and Autumn from September to October. Because of low temperature
and imperfect tourist facilities in Mongolia, in winter, the cost of tourist industry
operators in Mongolia will increase and the tourism revenue will reduce.
Table 3 and Table 4 shows the arrival time of tourists is mainly in June, July
and August. The tourist season mainly focuses on June, July and August. Even if
it is extends from mid-May to mid-October, it only last for five months. Thus, the
enthusiasm of local tourism enterprises is not high. Mongolian tourism industry is
difficult to develop under the condition of cold weather and high cost.
OPPORTUNITIES BROUGHT BY THE BELT AND ROAD

STRATEGY TO MONGOLIAN TOURISM INDUSTRY
The Belt and Road development strategy proposed by China aims to create a
maritime economic corridor to connect Europe, Asia and Africa, so as to promote
the coordination of countries along the routes, for the purpose of achieving mutual
benefit. This development strategy will build the new economic structure, promote
Table 3. Number of inbound tourists of Mongolia by quarter 2010-2017 (person)
Quarter Quarter
Quarter I Quarter II Total
III IV
2010 30310 187703 355627 456090 1029730
2011 75520 203481 372659 460360 1112020
2012 72496 198794 378839 475892 1126021
2013 58110 168855 332951 417815 977731
2014 57647 154533 315901 392844 920925
2015 53804 147145 317210 386204 904363
2016 49562 146923 325042 404163 925690
2017 63577 180775 383141 469306 1096799
Source: National Statistics Office of Mongolia: [EB/OL].http://www.nso.mn.[2018-06-10].
208
Table 4. Tourism revenue of Mongolia by quarter 2010-2017 (million tugrug)
Quarter Quarter
Quarter I Quarter II Total
III IV
2010 1,058.80 3,821.10 7,252.00 6,688.20 18820.1
2011 1,443.60 2,968.50 16,044.80 3,388.00 23844.9
2012 1,411.70 13,784.40 12,831.10 9,854.30 37881.5
2013 4,465.80 12,218.40 28,340.00 8,674.60 53698.8
2014 9,913.50 16,288.80 34,894.30 4,173.40 65270
2015 37,526.70 51,589.50 73,819.20 31,761.00 194696.4
2016 40,947.70 69,641.80 78,373.50 58,129.60 247092.6
Source: National Statistics Office of Mongolia: [EB/OL].http://www.nso.mn.[2018-06-10].
economic cooperation among the countries, and accelerated economic development.

The boundary line is 4710 kilometers between China and Mongolia, which is a
geographical advantage for Sino-Mongolia coorporation. Mongolia is a developing
country and its economic growth is relatively dependent on China’s economic. The
Belt and Road initiative development strategy plays a very significant role in the
development of Mongolia’s tourism and economic development.
Promoting Tourism Industry and International

Cooperation of Mongolia
During the transitional period, the tourism industry in Mongolia developed rapidly.
However, the scale of tourism industry was small, and the tourism route was not
fully explored and developed, and unique tourism brand has not been established.
Compared with Mongolia, China’s tourism industry has comparatively perfect tourism
infrastructure and service, and made remarkable achievements. In addition, The Belt
and Road Initiative creates more cooperation opportunities for the tourism industry
all the countries along the road, especially, it provide good chance to Mongolian
tourism, to develop more tourist routes and speed up the unique image of Mongolian
tourism brand in the international community.
Tourism plays an important role in the new round of opening-up and international
cooperation represented by the Belt and Road Initiative of China. In recent years,
with the concerted efforts of the travel agencies of China, Mongolia and Russia,
these three countries have deepened their travel exchanges and cooperation, which
has become an important highlight of the construction of the China-Mongolia-
Russia Economic Corridor. The Belt and Road Initiative involves 65 countries,
not only involving Asian countries, but also involving 16 countries in Central and
209
Eastern Europe. Mongolia has taken an active part in the Silk Road Economic Belt
proposed by China with Mongolia’s Prairie Road Program, which is docked with
China’s Silk Road and Russia’s Eurasian Economic Union Plan. It playing the role
of a bridge connecting the Eurasian Development Strategy in The Belt and Road.
Facilitating the Construction of Tourism

Infrastructure of Mongolia
The backward transport infrastructure is one of the factors that affect the development
of tourism in Mongolia. The traffic condition is imperfect, and it not enough to meet
the traffic demands of inbound tourists, thus narrowing travel space range. However,
the Belt and Road initiative promotes infrastructure construction in Mongolia.
Mongolia has only one railway, Beijing-Ulaanbaatar-Moscow, which has been
aged because of years of disrepair. But beyond that, the difference in track gauge
between China and Mongolia has increased transportation costs and extended
transportation time, which has restricted the development of tourism in Mongolia.
The China, Mongolia and Russia economic corridor signed in UFA, Russia, July
9, 2015. The three countries emphasize to build and develop international land
transport corridors, ensuring the accessibility of passengers, goods and vehicles
through the implementation of infrastructure co- construction projects. Under the
initiative of the Belt and Road, enterprises from countries along the Belt and Road
invest Mongolia’s transport and production projects. For example: the Mongolian
Bagnall Power Plant Project, which is contracted by Chinese enterprises, was
officially opened in Ulaanbaatar on December 23, 2015. After the project put into
operation, it will not only change the outlook of Mongolia’s urban development, but
also push forward the tourism development of Mongolia. The economic corridor of
China, Mongolia and Russia takes the action to promote the interconnection of the
infrastructure. After the opening up of “Channels and Collaterals” in the tourism
industry, its development is bound to be rapid. In order to develop the tourism,
Mongolia will improve the quality of tourist service, to perfect the accommodation
environment and to add supporting facilities of the tourist attractions.
According to the statistics in the first half year of 2017, Mongolia’s total population
is 3.11 million. The Mongolian population is relatively small. The population of
people aged 15 and above is 1.23 million. There are only 38000 people in the
accommodation and catering industry. The development of tourism industry will
boost the training mechanism of professional talents in the service industry. The
investment in the infrastructure construction of countries along the Belt and Road will
further improve the national infrastructure and promote the accessibility of tourism.
210
Increasing Mongolian FDI Inflows
The increasing of foreign direct investment (FDI) and inbound tourism revenue
are main sources of the Mongolian foreign exchange income, which create the job
opportunities, and promote the economic development of Mongolia. The Belt and
Road initiatives advances Mongolian FDI. There is close relationship between FDI
and inbound tourism in Mongolia. FDI pushes forward the development of tourism
industry on the basis of the income generated by Mongolian inbound tourism
industry. Business tourism is an important part of tourism income in Mongolia.
FDI can cover the shortage of fund in the development of tourism industry. The
inbound tourism attracts more direct investment from foreign counties to Mongolia.
The essential relationship between FDI and inbound tourism is mutual funds and
tourist flow. Therefore, in terms of flow pattern and economic purpose, Mongolia’s
FDI and inbound tourism are closely related with each other, and has a concomitant
relationship.
Inbound tourism brings population flow, accelerates local infrastructure
construction and economic development, and forming regional advantages. It can
enhance the absorption of FDI, which has formed the development situation of inbound
tourism to boost the FDI of Mongolia. The growth of FDI can also directly promote
the exchange of business between Mongolia and source countries of the tourist. A
certain scale of inbound business tourism can be formed. Bao Fuhua(2016) stated, at
the same time, inbound business tourism indirectly promote the personnel exchanges
between the two countries and reputation of the tourism service of Mongolia, to
facilitate inbound tourism is for the purpose of visiting relatives and sightseeing.
Therefore, the increase of FDI brings the trend of inbound tourism development.
Creating Revenues for Tourism
China puts forward the Belt and Road initiative, calling on countries to concern
themselves promoting policy coordination, facilities connectivity, unimpeded
trade, financial integration and people-to-people bonds. All of this is the top-level
design policies of promoting tourism industry of countries along the route. Jiang
Yiyi(2017) argued, under the Belt and Road initiative, the tourism industry deepen
the cooperation, which shifts from the market cooperation to the resource flow
and brand, service cooperation. In 2014, Chinese president Xi Jinping’s visit to
Mongolia promoted a China-Mongolia comprehensive strategic partnership. In
the same year, the heads of China, Russia and Mongolia held their first meeting
in Dushanbe, proposing practical cooperation in tourism and other fields. They
approved the ”Mid-term road map for the development of tripartite cooperation
211
of the China-Russia-Mongolia” at the second summit in Ufa, in 2015, and clearly

stated that the three parties would expand the cooperation in the tourism field and
jointly built an international tourist route of the “Tea Road”. At the third meeting in
Tashkent, China, Russia and Mongolia agreed with the planning of economic corridor
construction, and signed “The Outline of the Construction of China, Mongolia and
Russia Economic Corridor”. President Xi Jinping pointed out that China, Russia,
and Mongolia rely on the advantages of each other as a neighboring country to
carry out close cooperation and actively implement the ”Mid-term road map for
the development of tripartite cooperation of the China-Russia-Mongolia”. Three
countries have made positive progress and achievements in the fields of economic,
trade, humanities, transit transport, tourism and sports. In July 22, 2016, the first
China-Russia-Mongolia Tourism Ministers’ Meeting was successfully held in Hohhot,
Inner Mongolia for implementing the consensus approved at the third meetings. In
July, 2016, Premier Li Keqiang successfully visited Mongolia and attended the Asia
Europe Summit held in Mongolia, which provided new opportunities for both sides
to strengthen further practical cooperation in various fields, including environmental
protection, tourism and other fields.
The scale of tourism exchange among China, Russia, and Mongolia has exceeded
5.431 million (person) in 2016. Among them, Sino-Russian bilateral exchanges
reached 3.264 million (person), two-way exchanges of Sino-Mongolia was 1.473
million (person), and Russian-Mongolian exchanges was about 0.606 million (person).
The rapid growth of the number of tourists is a huge market support for the practical
cooperation of China- Russia-Mongolia. The cross border tourism exchanges and
cooperation of Sino- Mongolia have been increasing rapidly. At present, 15 Sino-
Mongolian border tourism routes have been explored.
Jiang yiyi(2017) found that during the Thirteenth Five-Year Plan period, China
will contribute 150 million tourists and 200 billion dollars in consumption to
countries along the Belt and Road. The inbound tourists in Mongolia reached 404
thousand, and generated US $321 million income in 2016. In the past, mineral
resources accounted for a large proportion of GDP in Mongolia. But mineral
mining and export do not bring obvious increasing benefit to the ordinary people
of Mongolia. On the contrary, tourism has driven the service industry in Mongolia,
which has a huge impact on the income of ordinary people. The accommodation and
catering industry in Mongolia is a part of the tourism industry. In 2016, the output
of accommodation and catering industry reached 241812.7 million Mongolian
tugrug, with annual growth rate of 12%. Obviously, “The Belt and Road” strategy
has enabled Mongolia’s tourism industry to generate income revenue and increase
Mongolia’s tourism output.
212
CONCLUSION
In the environment of economic crisis caused the world economic depression,

and economy of the Mongolia which is based on the mining industry, enters a
bottleneck period. Thus it Mongolia needs to expand the new development field.
China, as Mongolia’s largest trading partner of Mongolia, proposed the development
strategy of The Belt and Road, which brought the new development opportunity and
challenge to the countries on the road, especially to Mongolian economy which is
under slow development. Although Mongolia’s tourism industry has grown rapidly,
it has not been fully appreciated by the government, Mongolia still focus economic
development on mining.
The rich natural resources, beautiful ecological environment and long history of
folk culture, etc. are the resource basis for the development of tourism in Mongolia.
Under the background of the Belt and Road and construction of the China-Mongolia-
Russia Economic Corridor, the resource of tourism give full scope to function, and the
inadequacies of the tourism industry have been improved. The Belt and Road will not
only promote Mongolia’s tourism growth, but also promote the service industry and
foreign investment, and the development of Mongolia’s third industries. In this way,
Mongolia’s further economic development will be promoted. In the condition of the
Belt and Road initiative, the development of tourism has great prospects Mongolia.
On the other hand, “the Belt and Road” development strategy is not only an
opportunity for Mongolia to develop the tourism industry, but also a very good
opportunity for development of Chinese tourism industry. The advantages of
geographical and cultural identity are the strong foundations for Sino-Mongolian
cooperation in various fields. The geographical location has unique advantages in the
development of tourism cooperation between the two countries. Moreover, the Inner
Mongolian and Mongolian have a high degree of similarity in the field of language
and culture, which decreases the cultural identity barriers for the development of
tourism and promotes the social and cultural exchange of the two countries, it pushes
forward the Sino-Mongolian economic cooperation.
ACKNOWLEDGMENT
This research received no specific grant from any funding agency in the public,
commercial, or not-for-profit sectors.
213
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Glossary
Ancient Silk Road Trade Routes: An ancient network of trade routes that con-
nected the East and the West.
Beijing-Tianjin-Hebei Region: The “capital economic circle” of China, includ-

ing Beijing, Tianjin, and Hebei Province.
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infrastructure development and investment program introduced by the Chinese
government that covers Europe, Asia and Africa regions.
Cultural Distance: A difference in human values that are rooted in national

culture, which affect individuals’ attitude and behavior.
Economic Globalization: The widespread of international movement of groups,

capital, services, technology, and information that increase the interdependence of
world economies.
Fenwei Plain: The Fenhe Plain, Weihe Plain, and their surroundings in the
Yellow River Basin.
Infrastructure: The fundamental physical facilities and organizational system

that needed for the operations of a society.
Investment: Distribution of money in items or projects in the expectation of

benefits in the future.
Glossary
Road Transportation to Railway Transportation: Adjusting the transporta-

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railway transport.
Road Transportation to Waterway Transportation: Adjusting the transpor-

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Sanxi Area: Including Shanxi Province, Shaanxi Province, and Western Inner
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Small and Medium-Sized Enterprises (SMEs): Sales turnover and number of

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Transporting Coal From West to East: Transporting abundant coal resources

in the Western Region to the Eastern Region where coal resources are scarce.
Yangtze River Delta Region: Including Shanghai, Jiangsu Province, and Zhe-
jiang Province.
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268
About the Contributors
Wei Liu is presently the PhD scholar of the University of Sydney. His current
research interests include nonmarket strategy in emerging economies, corporate sus-
tainable strategy, regional studies, and strategic management in the Chinese context.
He has published several papers in refereed journals and presented numerous papers
at top-tier international business conferences. He also served as the reviewer in many
journals and conferences. He has won two National Social Science Foundation of
China Grant which supports his research on the Belt and Road Initiative. He is also
funded by the University of Sydney China Studies Centre Research Support Grants.
Zhe Zhang is a current PhD candidate in the Sydney School of Architecture,

Design and Planning, The University of Sydney. He currently focuses his research
interests on the governance of city-regions and the mechanisms of regional plan-
ning. Zhe holds a Bachelor of Architecture from Henan University, Kaifeng and
Master in Architecture from South China University of Technology, Guangzhou.
Before joining the University of Sydney, he has worked in various projects related
to architectural designing such as protection and renewal planning of traditional
villages, modern buildings design with Lingnan characteristics, renovation of tra-
ditional dwellings and planning on the historical blocks and streets. Also, Zhe has
participated the joint research on Heritage Architecture of Guangdong Province and
research on Vocabulary with Lingnan Characteristics, which is funded by Chinese
National Natural Science Foundation Projects. Previous projects experience has
ignited Zhe’s interests on urban planning. So in doctoral research, Zhe explores the
recent emergence of transformed forms and mechanisms of urban planning under
the context of regional development of China’s city-regions.
Sang-Bing Tsai is currently a Professor at University of Electronic Science and

Technology of China Zhongshan Institute, Capital University of Economics and
Business and Wuyi University. He is both Technology Management and Business
Management PhD. He has published many research articles in SCI / SSCI journals,
including International Journal of Production Research, International Journal of
Web Services Research, Advances in Mechanical Engineering, IEEE Transactions

on Systems Man Cybernetics-Systems, Plos One, Environment and Planning B-
Planning & Design, Sustainability, Renewable & Sustainable Energy Reviews,...etc.
His recent research interests in Computer Science, Information Management, Big
Data, Sustainability, Green Operation and Applied Mathematics. He has well over
100 published peer-reviewed journal articles. Dr. Tsai is will be the Co-Editor-in-
Chief for the Journal of Organizational and End User Computing. He is currently
the Associate Editor for Journal of Global Information Management, and Associate
Editor for International Journal of Digital Crime and Forensics, as well as serving
on the editorial boards of 10 other journals.
***
Bahar Baysal Kar is currently an assistant professor at the Department of Eco-

nomics at Kırklareli University in Turkey. She received his Ph.D. degree in Economics
from Uludag University in Turkey. She received his MBA and a bachelor’s degree
from Uludag University. Her research interest in comparative political economy,
international political economy, economic thought, economic systems, the political
economy of the Turkey, economics and ethics, economic development. Specifically,
varieties of capitalism, the future of global capitalism and the implications of global
financial crisis for the future of new world order are her recent research themes. She
has published many academic papers.
Jian-Yu Chen is the PhD scholar of Graduate School of International Studies

at Dong-A University in South Korea. He earned a Master’s degree in business ad-
ministration and Management from Pusan National University in 2016. His research
interests include corporate social responsibility and international business. He is
funded by the BK21 PLUS (Brain Korea 21 Program for Leading Universities &
Students) from 2017 to 2019.
Ying Chen is currently a master researcher in English Education at the Univer-

sity of Malaya.
Teo Poh Chuin is a Senior Lecturer from Faculty of Accountancy, Finance and
Business at Tunku Abdul Rahman University College, Kuala Lumpur, Malaysia.
She is an independent researcher who is actively involved in research projects and
publication. Her research interest is in international marketing and international
business. She is experienced in teaching students from different origin countries at
postgraduate and undergraduate levels.
269
Taha Egri holds a PhD. degree in Economics from Istanbul University, Turkey.
He was a visiting scholar at George Mason University between 2014 and 2016. He
is currently working as an assistant professor at Kırklareli University, where his
primary fields of interest include institutional economics, political economy of the
Middle East, military-economy relations and Islamic Economics. Egri has published
several articles on macroeconomic issues and middle east economies and has edited
two books on Islamic Economics. He is also a member of the editorial board of two
peer-reviewed journal namely, “the Journal of Human and Society” and “Turkish
Journal of Islamic Economics”.
Ge Han has a PhD from City University of Macau and is a research assistant of
Macau “One Belt. One Road” Research Center.
Maoxiang Lang, Ph.D., School of Traffic and Transportation, Beijing Jiaotong

University, Professor, doctoral tutor, deputy director of Logistics Engineering De-
partment, special researcher of China logistics society. He is mainly engaged in the
field of transportation logistics management, modern freight transport technology
and management, transportation marketing management. He published more than
90 articles in journal papers and conference papers.
Fuda Li is currently a PhD student at the City University of Macau. Before that,
he has received his bachelor’s degree at the Hunan University in 2013 and master
degree at the Lanzhou University in 2016.
Shiqi Li is a doctor in the School of Traffic and Transportation, Beijing Jiatong

University.
Xinyao Li is a research student in Northeast Electric Power University.
Yu Xueqiao received his M.S. degree in engineering from Northeast Forestry

University in Harbin, China. He is currently a Ph.D candidate in Beijing Jiaotong
University. His research interest is mainly in the area of Multi-modal Transportation
and Logistic Management. He has done a lot of in-depth research in these areas and
published a related paper.
Wang Yanling received her Ph.D in Transportation from Beijing Jiaotong Uni-
versity in Beijing, China. She is currently an associate professor in Beijing City
University. Her research interest is mainly in the area of Traffic and Transportation.
She has published more than a dozen research papers in academic Journals in the
above research area and has participated in several conferences.
270
Xiao Yu received his Ph.D in China academy of railway sciences, Beijing, China.
He is currently an associate research fellow in China academy of railway sciences.
His research interest is mainly in the area of Signal and Communication. He has
published several research papers in academic Journals in the above research area
and has participated in several conferences.
Yong Zhang is currently a postgraduate student at the University of Macau,

majoring in international law.
Linling Zhong is a graduated postgraduate student and received her master

degree in Interpreting and Translation, Mandarin and English from University of
Nottingham Ningbo China (UNNC). She has published an academic paper titled
Analysis on Translation of Children’s Literature from the Perspective of Functional
Equivalence Theory Based on Tale in Orange in CPCI-SSH. Her research interests in
translation, teaching English to speakers of other languages and children’s literature.
Ping Zhou is a Director of the Macau “One Belt One Road” Research Centre,
and the Associate Professor majoring in National Institute of Portuguese Studies
at the City University of Macau. He also serves as the Visiting Professor at the
Peking University.
271
272
Index
A culture 40, 46, 64, 67, 69, 77, 101, 153,

165, 189-190, 199, 202-204, 213
AIIB 15-16, 33, 110, 172, 180
ancient Silk Road trade routes 177-178, D
199
Domestic Strategies 75
B
E
Beijing-Tianjin-Hebei region 128-131,
134-135, 137, 146, 149 economic globalization 53, 61, 83, 158,
belt and road initiative 12-13, 17, 28, 33, 178, 181, 199
36, 44, 82-84, 87-88, 90, 92-93, 95-
105, 109-110, 113, 159, 176-178, 187, F
199-200, 209-211, 213 Fenwei Plain 129, 149
C G
case study 46, 108, 114-116 generalized cost 130-134, 137-140, 142,
challenges 19, 39, 52-53, 63, 97, 101, 110, 146
158-159, 176-177, 187, 190 global governance 1, 37
China 1-19, 28-31, 33, 36, 38-39, 44-50, globalization 1-2, 5, 12, 14, 19, 52-53, 61,
52-55, 58-65, 67-80, 83-86, 88-92, 72, 83, 109, 158, 178, 181, 199
97-104, 109-111, 113-117, 122-124,
129-130, 134-136, 144, 149-152, 159- I
161, 165-174, 176-192, 200-201, 206,
208-213 implications 1, 12
Chinese enterprises 28, 33, 52-56, 60, 65, industrial structure 68, 74-75, 83, 152, 159
68, 79, 98-99, 101, 159, 168, 210 infrastructure 4, 10, 12, 14-17, 19, 33, 44,
coal transportation 128, 130-132, 134-147 47, 49, 109-110, 113-114, 122, 129,
collaborative innovation 150, 152, 154- 152, 159, 169, 171, 174, 176-180,
155, 161 182, 185-188, 191, 199, 201-202, 204,
core competence 68 206, 209-211
Corporate social responsibility (CSR) 29 innovation 44, 63, 67-69, 73-76, 83, 86,
CSR Strategies 28, 40 98-99, 101, 103, 105, 150, 152-158,
cultural distance 39, 189, 199 161, 173, 185-186, 205
Index
intellectual property 7, 11, 58, 60-65, 67- risk of the CSR 28

80, 82-93, 95, 97-105 Road Transportation to Railway Transpor-
intellectual property protection 58, 61-62, tation 129-130, 142, 149
64-65, 70-73, 75-78, 80, 82-83, 86-87, Road Transportation to Waterway Trans-
89-90, 97-98, 101-105 portation 129, 149
International Strategies 77
investment 1, 3-12, 14-17, 19, 33, 36-40, S
44, 46-47, 49-50, 52-56, 60-61, 65,
73, 92, 98, 110-111, 113, 150, 152, Sanxi Area 134, 149
154, 156, 159-161, 168-169, 171-173, Silk Road 12-13, 16, 33, 58-59, 82-83,
177, 180-181, 184, 186, 190, 199, 109-110, 116, 152, 159, 165-167, 169,
206, 210-211, 213 171-173, 177-178, 180, 199, 201-202,
210
M Small and Medium-Sized Enterprises
(SMEs) 183, 199
Macau 164, 166-174 state capitalism 1-4
Malaysia 74, 87, 94, 98, 160, 176-177, state-owned enterprises 4, 8, 11, 28
180-192, 199
Mongolia 100, 130, 135, 149, 167, 200- T
213
multimodal transportation 114, 121, 130 the belt and road 13, 17, 28, 33, 36, 44,
67-68, 70-75, 77-80, 82-84, 87-88,
O 90, 92-93, 95-105, 108-110, 113, 150,
152, 159-160, 165, 176-178, 187,
One Belt One Road Initiative 58-62, 64-65, 199-200, 208-213
164-174, 199 the belt and road initiative 13, 17, 33, 36,
opportunities 11, 33, 35, 52, 67, 70, 114, 44, 82-84, 87-88, 90, 92-93, 95-105,
158-159, 172-173, 176-177, 182, 186- 109-110, 113, 159, 176-178, 187,
188, 191, 200-201, 208-209, 211-212 199-200, 209-211, 213
Outgoing Strategy 52 tourism 165, 184, 186, 200-206, 208-213
Transporting Coal from North to South
P 130, 134, 149
Transporting Coal from West to East 130,
problems 2-3, 14, 19, 30, 33, 40, 44, 50, 134, 149
60-61, 67-68, 70-71, 77, 79, 82, 88,
97-99, 110, 116, 129, 159-161, 170, Y
187, 204
Yangtze River Delta Region 129, 149
R
railway transportation 117, 123, 128-131,
134-137, 139-147, 149, 152
273

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The Belt and Road

A volume in the Advances in

Library of Congress Cataloging-in-Publication Data

Names: Liu, Wei, 1993- editor.

British Cataloguing in Publication Data

All work contributed to this book is new, previously-unpublished material.

For electronic access to this publication, please contact: [email protected].

Cases on Corporate Social Responsibility and Contemporary Issues in Organizations

Women Entrepreneurs and Strategic Decision Making in the Global Economy

Linking Cultural Dimensions and CSR Communication Emerging Research and...

Evidence-Based Initiatives for Organizational Change and Development

Handbook of Research on Business Models in Modern Competitive Scenarios

For an entire list of titles in this series, please visit:

701 East Chocolate Avenue, Hershey, PA 17033, USA

Compilation of References............................................................................... 217

Related References............................................................................................ 237

About the Contributors.................................................................................... 268

Innovation ability is the key to enterprise development. China’s electrolytic aluminum

Compilation of References............................................................................... 217

Related References............................................................................................ 237

About the Contributors.................................................................................... 268

is more likely to be pictured as a mostly geopolitical project with obvious political

practices in this topic, and also to contribute to developing theoretical, analytical,

We acknowledge IGI Global for their professional assistance in the publication of

The dominant power of post-communist world order is US free market capitalism.

(Bremmer, 2010) represented by emerging market economies such as China,

STATE CAPITALISM IN CHINA

It is difficult to examine the capitalism emerged in China within firm-centered

CHINESE ECONOMY IN THE PROCESS OF

of universities, firms and state-owned banks for the development of information

Bilateral and Regional Trade Agreements

In addition to international trade, foreign direct investment is also a component of

A New Trade and Investmet Strategy: ‘One

The Chinese vision differs in significant ways from neoliberal/Washington Consensus

will be used as a result of increasing infrastructure investments. Secondly, it is aimed

Asian Infrastructure Investment Bank (AIBB)

The establishment of the Asian Infrastructure Investment Bank (AIIB) is based on

Renminbi as an International Currency

funds for international investments. Moreover, the internationalization of Renminbi

The purpose of this paper is to introduce the “globalization with Chinese

McNally, C. A. (2015). The political economic logic of RMB Internationalization:

in exports. It contributed to the control of inflation in the country and to the

Figure 1. The pyramid of corporate social responsibility

CORPORATE SOCIAL RESPONSIBILITY(CSR)

Corporate Social Responsibility (CSR)

contributions to the development of economics, society and environment with the

The Chinese Government Gradually Guaranteed the Development of CSR in

1. Subject to Article 5 of Company Law of the People’s Republic of China,

Government and Third-Party Corporates Reinforce the Disclosure and Supervision

1. China CSR Compilation Guide Issued by Chinese Academy of Social

In general, current situation concerning the performance of CSR in Chinese

CSR Research Center of Chinese Academy of Social Sciences, CSR development

CSR of Chinese Enterprises Under the

Table 1. Summary of Chinese companies’ achievements and challenges in sustainable

Table 2. Summary of Chinese companies’ achievements and challenges in sustainable

Table 3. Summary of Chinese companies’ achievements and challenges in sustainable

localization operation and management, establishing favorable relation with local

Table 4. Summary of Chinese companies’ achievements and challenges in sustainable

Investment risks confronted by China-invested companies alongside the “One