Silk Road Fund to aid long-term projects

The turbulence caused by competition between big powers always leads to economic losses for businesses. For example, many transnational enterprises, including Chinese ones, suffered great losses during the United States-led invasion of Iraq in 2003.

Over the next few years, political turbulence is highly likely to occur in the Middle East, Southeast Asia, Eastern Europe and Northeast Asia, posing a great challenge to the Belt and Road strategy.

Fourth, China should avoid the risks posed by terrorism, which will present a major threat to Chinese businesses operating overseas.

Chinese businesses have already become targets for many local terrorist groups. For example, in 2004, 11 Chinese railway workers were killed by terrorists in Had Bakhshi, Afghanistan. In 2007, nine Chinese oilfield workers were killed by terrorists in the Ogaden region of Ethiopia.

China's promotion of the Belt and Road strategy will inevitably harm the interests of some foreign and local interest groups. To minimize the risks of terrorist attacks on Chinese businesses, we must therefore enhance intergovernmental cooperation to combat terrorism, strengthen Chinese workers' understanding of terrorism and how to combat it, take precautions that align with common international practice and develop sound emergency plans.

Fifth, China must avoid risks brought about by an unwise choice of foreign partners.

Experience has shown that choosing foreign partners is one of the most important decisions to make when initiating a project, yet it is often the most difficult decision. The recent setback suffered by a Chinese enterprise bidding for a high-speed railway project in Mexico was due to one of its Mexican partners being sued, and the event triggered a domestic political storm.

Such problems can be solved by communication and cooperation between Chinese and foreign governments and between trade unions and industrial associations, as well as through aid from consulting firms.

Sixth, China must avoid the risks of economic nationalism.

Economic nationalism has become a threat to many international energy enterprises. Bolivia's nationalization of energy assets in 2006, Mongolia's rejection of China Shenhua Energy's participation in the development of Tavan Tolgoi (the world's largest untapped coal deposit) in 2011 and Indonesia's ban on exports of unprocessed ore this year have all harmed international enterprises from China and from many other countries.

In the long-term, it is important to understand the roots of economic nationalism in order to prevent Chinese enterprises from falling prey to it.

Seventh, China must avoid the risks brought about by local trade unions.

Deciding how to tackle trade unions is a headache for Chinese businesses, no matter whether they are operating in developed or developing countries. SAIC Motor Corporation failed to invest in South Korean carmaker SsangYong Motor Company partly because it could not effectively work with the local trade union.

To ensure sound development of the Silk Road Fund projects, Chinese enterprises must fully understand the differences between Chinese and foreign trade unions, carefully fulfill their social responsibilities and maintain a sound relationship with local trade unions that upholds the spirit of mutual benefit and equality under the law.

Eighth, China must avoid the risks posed by a lack of knowledge about local markets and a lack of experience running international projects.

Chinese businesses should clearly differentiate between short-term emergency needs and long-term rigid demands to avoid the embarrassment and waste caused by newly built roads with no cars on them and no ships docked in newly built ports.

In 2010, when the China Railway Construction Corp finished a light rail project in Saudi Arabia, it registered a net loss of 4.1 billion yuan ($669 million; 542 million euros). Clearly there is also a great need for Chinese enterprises to improve internal management, learn common international practices and exercise strict control over budgets in compliance with international norms.

So how can we make full use of the $40 billion Silk Road Fund? We must regard it as a long-term global trade campaign aimed at creating both political and economic effects. Efforts should be made to prevent and simultaneously manage risks in politics, diplomacy and business.

The author is a senior research fellow at the Institute of Modern International Relations, Tsinghua University. The views do not necessarily reflect those of China Daily.