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China’s President Xi Jinping Asks ASEAN Countries to Join Hands in Building A ‘Digital Silk Road’

As China moves to cement its influence in the Asia-Pacific region, Chinese President Xi Jinping has promised to further strengthen cooperation and promote a “digital Silk Road” with ASEAN member states.

On November 27, President Xi assured the Asian leaders that China’s top priority is to develop its relationship with the Asean (Associations of Southeast Asian Nations) – 10 countries in the Southeast Asian region including Vietnam, Thailand, Singapore, Malaysia, Laos, Cambodia, Indonesia, the Philippines, Brunei, and Myanmar.

Xi’s speech comes just two days after President-elect Biden announced that his foreign policy agenda would see the U.S strengthens its relations and initiate a new leadership role in the Asia-Pacific.

While speaking via a video link to partners and participants at the China-ASEAN Expo in the Southwest Chinese city of Nanning, Xi said:

“China regards Asean as a priority in its neighborhood diplomacy and a key area for high-quality joint construction of the Belt and Road Initiative.”

Xi said this while referring to his Belt and Road initiative project to build infrastructure, investment, and trade along both ancient maritime and land Silk Roads (sea and land routes connecting South Asia and East Asia with Persia, South Asia, the Arabian Peninsula, East Africa, and Southern Europe).

Xi mentioned that China aims to collaborate with Asean nations to develop a “China-Asean digital port to promote digital connectivity, and build a ‘digital Silk Road’.”

Xi revealed his plans to lead China towards building close relationships with Asean to address pressure from the prolonged trade war caused by US President Trump in 2018.

China Embracing Blockchain Technology

So far there is no suggestion that the digitalization would involve the use of blockchain technology. However, President XI previously praised and regarded the technology as a breakthrough application, saying that China should seize opportunities presented by blockchain. Xi reiterated the importance of blockchain and the need to accelerate the development of the technology in the country in various sectors. Over 500 blockchain projects have been registered with China’s government.

China is poised to take the lead in blockchain after the country’s leader President Xi gave a strong backing to the technology. The move sets to allow the world’s second-largest economy to control the development of the nascent technology in the absence of competition from the U.S and Europe.

As China seeks to develop closer ties and trade relations in the Asean region, it is possible that the digital yuan, a CBCD project by China’s Central Bank, would be accepted in these countries. China intends to build a payment network autonomous from the U.S dollar, which remains the most popular medium for international business transactions. As the world moves to digital, China authorities remain committed to launching digital yuan so that the CBDC could get dominance by facilitating cross-border transactions in the region.

ADB Launches Blockchain Project for Cross-Border Securities Transactions in APAC

To make cross-border securities transactions more secure and efficient in Asia and the Pacific region, the Asian Development Bank (ADB) is going a notch higher by deploying a blockchain-powered project to connect securities depositories and central banks.

Per the announcement:

“Working with leading blockchain companies, ADB will seek to develop ways to directly connect central banks and securities depositories in the ASEAN+3 region within a Blockchain network.”

Therefore, the project will cover South Korea, China, Japan, and the Association of Southeast Asian Nations (ASEAN).

The time constraint is expected to be eliminated because institutions will be directly connected using a blockchain network. Moreover, this approach will minimize settlement risks and transaction costs.

Currently, cross-border transactions in the region take at least two days because they have to be processed through global centres in Europe or the U.S. Furthermore, time differences and varying operating hours have emerged as significant stumbling blocks.

To test the viability of central bank digital currencies (CBDCs) in the region and the project’s interoperability, ADB is partnering with other players like Soramitsu, R3, Fujitsu, and ConsenSys.

ADB disclosed that the blockchain project would be rolled out in 2 phases, with the designing phase expected to be finished by the end of March, whereas the prototyping phase is scheduled for Q2 2022.

The institution also sees this initiative as a milestone towards a sustainable, resilient, inclusive, and prosperous Asia and the Pacific.

In September 2021, the Bank for International Settlements (BIS) joined forces with the central banks of South Africa, Malaysia, Singapore, and Australia to kick start a project aimed at testing the use of CBDCs in cross-border payments to eliminate intermediaries.

A month later, the Financial Stability Board (FSB), a G20-backed think tank, cited the duo of government-issued CBDCs and stablecoins as crucial drivers in pursuing a better cross-border payment system.

Philippines Spearheads ASEAN AI Regulatory Framework

At the World Economic Forum in Davos, Martin Romualdez, the Speaker of the Philippines’ Congress, announced a significant initiative to present a legal framework for regulating Artificial Intelligence (AI) to the Association of Southeast Asian Nations (ASEAN) when the Philippines chairs the bloc in 2026. This move marks a proactive step towards addressing the growing significance of AI and cybersecurity in the digital economy.

Romualdez’s proposition emphasizes creating a Southeast Asian regulatory framework, drawing from the Philippines’ own draft legislation on AI. This decision underlines the urgency of governing the rapid advancements and applications of generative AI, which are causing both excitement and concern globally due to their potential to revolutionize industries. The initiative is seen as a “gift” to ASEAN, intending to foster regional collaboration in digitization and cybersecurity within economic policies.

The Philippines’ push towards a structured AI regulatory framework contrasts with ASEAN’s current approach, which leans more towards a business-friendly, less compliance-heavy model. This difference highlights the varying approaches to AI governance in a region characterized by diverse rules governing censorship, intellectual property, misinformation, and internet use.

For the Philippines, this initiative holds particular importance due to the nation’s significant Business Process Outsourcing (BPO) sector, which is currently facing substantial challenges. Romualdez stressed the vulnerability of this sector and the necessity to transform and upskill personnel to meet the demands of an AI-enabled economy. The proposed legal framework aims not only to cater to the Philippines’ needs but also to be apt for the entire ASEAN region, thus promoting regional cooperation in the face of technological advancements.

Romualdez’s announcement reflects a global trend where regulators are rapidly trying to draft regulations to manage the use of generative AI. This emerging technology, with its vast potential, has become a central focus for many economies, necessitating a balanced approach that encourages innovation while mitigating risks.