Op-Ed Contributors

Fueling economic exchanges

By Wan Jifei (China Daily)
Updated: 2010-09-02 08:59

Under the multilateral framework of the Shanghai Cooperation Organization (SCO), substantial progress has been made in regional economic cooperation, trade and investment in recent years.

Trade volume has been expanding annually and cooperation in energy, transportation, telecommunications and mining has improved both in depth and breadth.

Against the backdrop of increasing global and regional challenges such as the global financial crisis, making full use of the SCO platform for regional economic development is of great significance for the region's cohesiveness, sustainable development and economic and trade cooperation between China and Central Asian countries.

Over the past eight years, since the establishment of its predecessor the Shanghai Five in 2001, the SCO has finalized its legal framework, institutional mechanism and development objectives. Regional cooperation has been improving in scale and area. The regional trade and investment environment has gradually improved with great achievements made in the fields of culture, energy and environmental protection. The SCO has become one of the most important multilateral cooperation mechanisms between China and Central Asian countries.

The organization has also played an important role in promoting sustained and rapid development of regional trade with an optimized structure.

By 2008, trading volume between China and SCO member states had reached $86.8 billion, compared with the $12.1 billion in 2001, with an annual average growth rate of more than 30 percent. The figure exceeded the targeted $80 billion by 2010, an amount proposed by Premier Wen Jiabao in 2006. At the same time, trade structure among members has been further optimized to reflect their economic links.

China's export of machinery and electronic products has served as the main driving force behind the rapid export growth in Central Asian nations and Russia. With steady economic development and the expansion of domestic demand in regional countries, there will be great potential in economic and trade cooperation between China and SCO members.

The expansion of regional investment has also been progressing in scale and field under the multilateral cooperative mechanism. In recent years, SCO members have actively adjusted investment-related policies and regulations. Social, economic and regulatory environments have also improved dramatically. Similarly, mutual investment has increased rapidly and investment fields have expanded gradually. By the end of 2007, China's direct non-financial investment in Central Asian countries and Russia stood at $2.1 billion. Chinese enterprises' investment in Kazakhstan oil assets, exploration and pipeline exceeded $6 billion. Correspondingly, investment from other SCO members in China has also experienced stable increase. Until the end of 2007, the accumulative volume of investment of SCO members in China surpassed $2 billion.

Among SCO members, Russia and four Central Asian countries are all very rich in energy resources and the energy industry has become the backbone of their national economies. Energy cooperation among SCO member states has constituted the main part of their efforts to enhance mutual confidence and benefits.

Since the global financial crisis, SCO members have also joined hands in coping with an unprecedented crisis in decades that has imposed great pressures and challenges to economic cooperation among SCO members.

At the 7th Prime Ministers' Meeting SCO members held in Astana, capital of Kazakhstan on Oct 30, 2008, intensive discussions were conducted over concrete measures to cope with the financial crisis. Members decided to consolidate and strengthen their cooperation to ward off the crisis in various aspects. In June 2009, SCO member states at the Yekaterinburg summit reached consensus to fight the financial crisis. President Hu Jintao also announced that China would provide $10 billion of credit for member states to cope with the crisis.

Despite a broad prospect for regional cooperation with increasing openness and a foundation of sound economic cooperation, facilitated by China's increasing involvement in joint regional efforts, the SCO has also faced various challenges because of the countries' different economic development levels, a shortage of multilateral cooperation and the wide gap in financing.

Faced with these unfavorable factors, SCO members should follow the principles of the market economy, equality, mutual benefit and a regional economic cooperation mechanism to advance bilateral and multilateral cooperation in a gradual manner. As two leading players, China and Russia should also play leading roles in promoting regional economic cooperation through institutional innovations and policy stimulus mechanisms.

As important communication and financing platforms, the SCO Business Council and Bank Consortium can similarly play important roles to enhance economic and financial cooperation of the SCO as well as the planning and implementation of regional projects.

Despite having some impact on the SCO and its members, the global financial crisis has brought opportunities for regional economic cooperation. Joint efforts from SCO members to tackle the crisis and their determination to meet challenges and overcome difficulties will enhance the organization's cohesiveness. The adoption of a series of measures to stimulate domestic consumption and boost the economy by SCO members will also accelerate their infrastructure construction. This will promote the implementation of the group's strategic decision to build an "infrastructure network". The great importance attached by members to economic restructuring and their unremitting efforts to increase the quality of the economy will help lay a solid foundation for SCO members to expand economic cooperation.

In October 2009, the 8th Prime Ministers Meeting of the SCO approved a joint initiative to increase multilateral economic cooperation and deal with the global financial crisis to promote sustainable economic development. China will work together with other regional member states to actively implement the measures, expand bilateral and multilateral trade and mutual investment, and encourage more Chinese enterprises to "go global" in a bid to boost pragmatic cooperation among SCO members in key fields.

With the implementation of various measures, the participation of enterprises from all member states and their joint efforts to give the regional economic cooperation mechanism full play, the cohesiveness of the SCO is expected to be further strengthened and booming regional economic cooperation will continue to promote economic prosperity for all SCO members.

The author is chairman of the China Council for the Promotion of International Trade.