Global Economic Philanthropy Is A Unique Case
[lo_drop_caps style=”normal” tag=””]Whenever, Chinese community undertakes a foreign investment project, it has a multiplier effect on the economy at large and boosts the domestic revenue at a broader horizon. There are three channels through which local revenue accelerates. Firstly, revenues increase by the higher profit turnover of the domestic government’s own enterprises. Secondly, international trade and projects aids private companies to get registered in the local periphery which translates in increased production and simultaneously government tax revenue collection.[/lo_drop_caps]
Thirdly, foreign projects at some extent contribute in job creation if not permanently, then at least temporary, which overall improves the societal well-being. Besides the stated benefits for the Chinese national government, the local entrepreneurs involved are main drives to turn these projects into reality and serve as instruments for individual promotion.
Now, taking up the case of China-Belarus new trade projects it is obvious that any country that takes the initiative to invest and trade has potential benefits attached as it is believed to be no free lunches. First of all, investment in Belarus; Chinese are pursuing their own interests which are certainly interests vested by government officials. In a situation where economic irrationality is presented by the rationality of the individual decision makers, career perspectives for government officials in China are most suited for those providing large budget surpluses. Therefore, Chinese investment in Belarus is not purely confined by maximisation of Chinese economy in general. It can even be opposite to this objective as system is designed in a way that maximizes the local GDP and fiscal revenues which justifies economic rationality.
Chinese economy is more prone towards short-term results as the local officials have to report about the current updates to the central government rather than the long-term materialisation. Thus, quantifiable results supersede the overall progress. The primary emphasis is placed on statistical numbers and indicators that help in generating a competitive environment among the local governments. There is famous Chinese saying that“ numbers produce officials and officials produce numbers”. It clearly defines the ideological mechanism of the vicious circle that Belarusians aim to renounce with the Belavezha Accords.
Along with the potential gains and direct benefits from foreign investment there come wider opportunities for bribes and kickbacks. It is believed any type of investment that promotes and contributes within the governmental and part hierarchy translates in creation of personal wealth through corruption mechanisms.
Now, it is important to understand the phenomena behind the investment redirection by China. Why China is interested in investing in Central and East European countries. There is a major problem that China is facing that is at home there is problem of overinvesting in its own country. This is considered to be unavoidable problem because the performance of local officials is measured by the locality’s GDP growth. There is list of examples from China where airports, railroads and highways are only built for the sake of construction process and to increase localities GDP in a short run. For instance, the construction of Fuyang city airport project investment amounted to 320 million yuan. But, after being operational for a year it has to be closed down due to low air traffic. This example explains that Chinese are more interested in construction process rather than practical use of the final facilities. Once the project is completed Chinese are facing maintenance problems. Therefore, Chinese local governments save their money constructing outside China using the export credits. Thus cost of maintenance for final facility is transferred to another country. Likewise, local governments gain some advantages from increasing production and providing jobs for people in localities. It will translate in short-term payoffs.
Based on the above analysis it provides evidence that what happens in China and the reason behind Chinese support with their export credit to different countries. In crux China is supersaturated with the investment projects within the country therefore benefits from continuing realization of the same projects abroad. Thus, Chinese projects in Belarus are with similar project intentions in corresponding industries. China has wide range of unnecessary construction of highways but Belarus in turn is far from the problem of having unnecessary expressways. Therefore, improvement of the infrastructural improvement is necessity and one of the top priorities. More than half of the 15,800 kilometers of Belarusian national highways, which stretch to about 9,000 kilometers, need at least a surface treatment therefore China redirected more than 322 US million dollars to Belarus. Moreover, Chinese and Belarusian parties also signed a 102 million US dollars loan for Intelligent Transport System in Minsk, which involves improvement projects on M-2 highway that leads to Minsk-National Airport and M-9 highway, which is a ring road around the capital.
In order to conclude, there are important lessons to be learnt from Chinese strategies and the way to promote their domestic industry even through export-credit. Every developing economy needs to realise their export potentials and best exploitation of their resources. Without giving boost to domestic industry in short-term it is impossible to meet with long term objectives. This analysis provides a wide picture that Belarusian trade investment by foreigners is unlikely to reap fruitful benefits to its economy as the possibility for them to benefit to the same extent as the Chinese officials is limited by the nature of Chinese loans used to fund the projects. China is smart in establishing trade links as it provides Belarusians with loans, conditioned upon the purchase of goods and services from the businesses and local state owned enterprises in China.