CANBERRA: On the first state visit to China by a Japanese leader in 11 years, Prime Minister Shinzo Abe and President Xi Jinping announced 50…
CANBERRA: On the first state visit to China by a Japanese leader in 11 years, Prime Minister Shinzo Abe and President Xi Jinping announced 50 joint infrastructure projects.
This embrace of joint infrastructure investment cooperation through the Belt and Road Initiative in all but name is on a scale even larger than was anticipated before Abe’s arrival in Beijing.
There was also a raft of other announcements that will help normalise the political relationship between the two Asian giants that share one of the largest economic relationships in the world. But the most consequential of those could be the joint investment in infrastructure projects.
China’s welcoming of Japan to undertake joint projects is a sign of a change in approach to rolling out its Belt and Road Initiative. Mr Xi’s signature project has found resistance both abroad and at home, and many of the risks have materialised, resulting in failed projects bringing economic and political costs.
For Japan it’s a pragmatic way to engage China. As Chinese policymakers search for ways to better deploy the country’s vast sums of capital abroad, Japan has experience of doing just that dating back to the 1970s — including of geopolitical pushback.
Understanding that the Belt and Road is here to stay, Japanese engagement can shape the massive investments and get more business for its companies. It’s also a part of a broader hedge against an increasingly uncertain Japan–US relationship.
INFRASTRUCTURE INVESTMENTS
Asia needs a large volume of infrastructure investment to achieve potential growth rates that will continue to exceed the global average. Competition from different sources of infrastructure investment is a positive development, as is some cooperation.
Increased competition will result in improved outcomes, both in terms of the scale and the quality of infrastructure investment, so long as recipient countries have the capacity to assess alternative project proposals, have good governance and are clear about the consequences of projects that fail.
Infrastructure investment that is undertaken adhering to the principles of open tenders and transparency will reduce the likelihood of failed projects and improve the outcomes for both investors and host communities.
