Breaking the “Resource Curse” and Achieving Mutual Benefit Through BRI Cooperation

Abstract

Looking back, developing countries with rich natural resources have mainly played the role of exporters of commodity raw materials in the process of industrialization and globalization. The high volatility of the terms of trade have had a far-reaching negative impact on their economic growth and structure. We believe that the industrial comparative advantages of China and BRI countries in commodity raw materials are, to a large degree, mutually complementary. We believe BRI coop-eration in the commodity raw materials sector, which differs from the resources trade in the past, brings opportunities to help BRI countries break the resource curse (The economic concept of “resource curse” first appeared in Richard M. Auty’s book Sustaining development in mineral economies: The resource curse thesis, published in 1993. Through extensive cross-country comparative studies, the author shows that abundant natural resources may be a curse rather than a blessing to economic devel-opment, and that most countries with an abundance of natural resources have lower economic growth than countries with fewer natural resources) and achieve win–win results. It is also important for China to ensure the supply of key raw materials and transfer of production capacity. In addition, we expect BRI cooperation to facilitate the industrialization process in BRI countries, stimulate global commodity demand, and initiate a new super cycle for commodities. We divide China’s cooperation with BRI countries in the commodity raw mate-rials sector into three stages—the initial exploration stage, the accelerating cooper-ation stage, and the high-quality development stage. In 2013, the BRI was rolled out, marking a new stage of high-quality development for China’s international cooperation. Experience in BRI cooperation includes: (1) Establishing a cooperation mecha-nism based on complementary industrial advantages and mutually beneficial coop-eration; (2) empowering BRI cooperation with China’s established manufacturing sector, strong overseas capabilities in engineering and technologies, and capital strength; and (3) contributing Chinese wisdom and solutions to environmental, social, and governance (ESG) and poverty eradication in BRI countries. Lessons from BRI cooperation include: Some Chinese companies do not have flex-ible decision-making mechanisms, and their international operation and risk control capabilities need to be improved further. The lack of supporting institutions and service systems for overseas mining investment also brings uncertainties. We make an assessment on key BRI countries in commodity raw material indus-tries based on the World Bank’s Political Stability and Absence of Violence/Terrorism indicator and ease of doing business score. According to our analysis, BRI cooperation faces major challenges on three fronts. First, geopolitical risks are rising against the backdrop of de-globalization. Second, underdeveloped supporting infrastructure brings a high level of uncertainty to international operations. Third, ESG, community conflict, and public security risks could be rising. We provide the following recommendations to the Chinese government and enter-prises. First, improving the public service system for BRI cooperation. Second, advancing RMB settlement and invoicing to facilitate the internationalization of the RMB. Third, attaching great importance to the integration of ESG and cultural values, and building an ESG evaluation system for BRI cooperation with Chinese characteristics.