China Promotes Belt and Road Projects, Curbs Non-Productive Investments Abroad

New guidelines on overseas investments by Chinese citizens were just recently released by the Chinese government, which restrict speculative activities and encourage development of the real economy. Since the launching of the Belt and Road Initiative and the Asian Infrastructure Investment Bank in particular, Chinese economists have been discussing ways to that citizens’ savings could be invested abroad without causing large capital flight.

Bloomberg reported on Aug. 18 that the National Development and Reform Commission had established three categories for overseas investments: banned, restricted and encouraged, which the news agency summarized as follows:

“Banned: Core military technology, gambling, sex industry, investments contrary to national security;

“Restricted: Real estate, hotels, film, entertainment, sports, obsolete equipment, investments that contravene environmental standards;” and

“Encouraged: Investments that further Belt and Road framework, enhance China’s technical standards, research and development, oil and mining exploration, agriculture and fishing.”

This guidance is the latest in a series of dirigist measures taken by the government to crack down on speculative activity, dry up “shadow banking,” and shore up foreign exchange reserves, so as to concentrate on development.

The guidance states:

“Some companies focused on property rather than the real economy, which, instead of boosting the domestic economy, triggered capital outflows and shook financial security.” Likewise, “some companies disregarded the environment, energy and safety regulations in target countries, which resulted in disputes and impaired China’s image.”

Recent data compiled by Thompson Reuters show that Chinese investments in countries targeted by the Belt and Road Initiative hit $33 billion in 2017 by the end of July, compared to the total of $31 billion in all of 2016. This figure does not include commitments, but invested funds.

Meanwhile, on the domestic front, the Chinese government remains committed to completely eradicating poverty in the country by 2020. Concretely, that means lifting more than 10 million people out of poverty every year, “meaning nearly one million people per month, or 20 people per minute,” as recently reported by Xinhua.

That is a prodigious task, by any standard, but the entire country is mobilized to ensure its success. And it can count on past experience, since China has lifted more than 600 million people out of poverty in the past 40 years.