Dialogue and exchanges crucial to Belt and Road

International cooperation forum in Beijing marked a big stride for regional cohesion-but financing is only part of the picture

Leaders from 29 countries and more than 80 international organizations convened in Beijing on May 14 and 15 for the Belt and Road Forum for International Cooperation to discuss the framework of the Belt and Road Initiative, China's proposal for promoting global economic cooperation.

The forum was an important step forward in regional cohesion. The Belt and Road itself is in striking contrast to rising populism in the European Union and the United States, where discussions of globalization have largely centered on its harm rather than its advantages. But much work remains to ensure the success of the initiative.

The Asian Development Bank estimates that $26 trillion (23.4 trillion euros; ￡20.1 trillion) in infrastructure investment is needed by 2030 to achieve Asia's development goals, although few countries are well-equipped (or well-financed) to rise to this challenge.

Since 2013, when President Xi Jinping announced his vision for an overland "economic belt" in Central Asia along the old Silk Road, and for a "maritime silk road" connecting China with Southeast Asia - thus setting the geographic framework for the Belt and Road - China has established a number of development funds to meet that need. The $40 billion Silk Road Development Fund and existing support offered by the China Development Bank and the Export-Import Bank of China are well poised to meet the financing needs of the region.

In addition to financing, China is just as eager to send its own companies abroad to assist in the implementation of these projects, providing necessary engineering and technical support. Importantly, this idea ties into another complex policy initiative within China itself, as policymakers push for supply-side structural reform. In addition to destocking the property inventory, cutting corporate costs, deleveraging and promoting technological innovation, China could open new markets to many of its own State-owned enterprises, helping them sustain their operations as they initiate structural reforms.

About 50 SOEs are already engaged with roughly 1,700 overseas projects under the Belt and Road framework. This is largely where China emphasizes the "win-win" role of Belt and Road: It has the tools to fit the region's needs.

Figures indicate that trade in goods between China and Belt and Road countries from 2014 to 2016, the rough timeline of Belt and Road's existence, reached $3.1 trillion, accounting for 25.8 percent of China's total external trade in that period. While significant, that number is spread among 65 nations. By comparison, trade in goods with the United States - a nonparticipant to Belt and Road - reached $1.6 trillion over that same period. Of course, these figures are expected to grow as investments in regional infrastructure settle and mature, allowing for newer (and, ideally, cost competitive) trade routes to spring up by land and sea.

A larger issue is that, despite pushing regional integration, most deals under the Belt and Road framework rely on bilateral deals between China and its partners. This is not bad for the region in the short term. But what are the limits of true regional cohesion, if other Belt and Road countries are only dealing with China, and not each other? The framework lacks a central multilateral mechanism to encourage this type of inter-stakeholder cooperation. Regular meetings that bring all parties to the table can set common goals, while clearer governance could, in theory, better leverage or redeploy regional advantages into areas that need capital or investment guidance the most.

China has recognized such challenges. At the Belt and Road Forum for International Cooperation, President Xi notably announced the creation of a number of multilateral economic and financial research institutions and capacity-building centers to encourage cooperation and future dialogue.

Greater dialogue and exchange is in China's interests, too. Regular engagement can establish regional standards for transparency, creditworthiness and capital management, all of which are crucial factors in ensuring returns on investment.

The AIIB is a step in the right direction toward multilateral governance, and its overtures to cooperate with international bodies, such as the Asian Development Bank and the International Monetary Fund, should be lauded. But financing is only part of the picture. Money and investment alone, however badly they are needed, will not smooth over the complex historical and political issues that divide the region, or ensure the safety of investments within Belt and Road countries. It will be crucial to see how China - and Chinese-backed institutions - address this reality.

The authors are analysts at The Economist Intelligence Unit. The views do not necessarily reflect those of China Daily.