The Belt and Road Initiative, which is the forerunner of the comprehensive development and investment initiatives launched by Chinese President Xi Jinping in 2013 and forms the center of the country’s foreign policy, was initially designed to connect East Asia and Europe through physical infrastructure. Over the decade since then, the project has spread to Africa, Oceania, and Latin America, significantly expanding China’s economic and political influence.[i]
As the Belt and Road Initiative entered its second decade, China’s Ministry of Industry and Information Technology announced plans for a new public blockchain platform designed to enhance cross-border cooperation and reduce disputes among Belt and Road Initiative participants on Saturday March 30, 2024.[ii] According to this statement, the project will be managed by the Shanghai ShuTu Blockchain Research Institute, affiliated with Conflux Network[iii]. Previously, ShuTu Research Institute has explored the deployment of yuan-pegged stablecoins on Conflux to support cross-border payments for Chinese businesses. It is also working with China’s ongoing Central Bank Digital Currency (CBDC) project.
Many of the challenges that the new blockchain infrastructure platform is trying to solve relate to cross-border disputes that slow the movement of money, goods and information between the nearly 150 countries participating in the Belt and Road Initiative. While other countries benefit from Chinese investments, international transactions can take days or even weeks to finalize when relying on old payment methods. For example, when transferring money between Tajikistan and Georgia, two beneficiaries of the Belt and Road investment, businesses have traditionally relied on the dollar as an intermediary currency to facilitate complex interbank transactions. This has led to recipients often waiting longer than two weeks for payments to arrive, creating a significant trade barrier between Central Asian countries, according to the RTGS Global CEO Jarrad Hubble.[iv]
In this context, the new platform has the advantage of providing faster and lower-cost cross-border payments by taking advantage of blockchain technology, replacing traditional interbank transactions. This also has the potential to reduce the need for the US dollar to be used as an intermediary currency. On the other hand, collaboration between the ShuTu Blockchain Research Institute and China’s ongoing Central Bank Digital Currency (CBDC) project demonstrates a potential synergy between blockchain technology and digital currency initiatives. This could accelerate the development of China’s digital currency within the Belt and Road network and provide an alternative to traditional currencies. This could further China’s goal of internationalizing its currency.
Countries that are parties to the Belt and Road Initiative will have the opportunity to carry out commercial transactions, supply chain management, and commercial document transactions in a more transparent, efficient and secure manner by taking advantage of blockchain technology. This has the potential to benefit businesses and economies that participate in the Belt and Road Initiative by leading to faster and more efficient cross-border transactions. In this context, it is anticipated that the implementation of the blockchain infrastructure platform could encourage countries to participate in the Belt and Road Initiative which previously expressed doubts about joining the project.
In conclusion, the blockchain platform is intended to address challenges related to cross-border disputes, such as delays in settlement times for commercial transactions and dependence on intermediary currencies. The envisioned Blockchain Infrastructure Platform will leverage the transparency benefits of blockchain technology to provide a more reliable environment for recording and monitoring transactions. This will facilitate the tracking of international trade transactions and improvement of customs processes. It is envisaged that, on the one hand, it will contribute to the reduction of trade barriers in the international market faced by businesses and economies participating in the Belt and Road Initiative by providing the opportunity for more efficient and direct transactions, and on the other hand, it will lead to increased competition between these businesses and economies. China’s support for such technology-focused projects helps highlight the country’s claim to technological leadership. This may help China to become more influential in the international arena.
Author: Ezgi KÖKLEN
[i] “China’s Massive Belt and Road Initiative”, Council on Foreign Relations,https://www.cfr.org/backgrounder/chinas-massive-belt-and-road-initiative, (Date of Access: 08.04.2024).
[ii] “Chinese Government Reveals Public Blockchain Platform for Belt and Road Initiative”, https://www.ccn.com/news/chinese-public-blockchain-belt-road-initiative/, (Date of Access: 06.04.2024).
[iv] Ibid.