China’s Belt and Road Initiative now up and running
DESPITE CURRENT difficulties and challenges facing the global economy, China is well underway with its grand Belt and Road Initiative for further opening up its economy to the rest of the world. Over the past four years, we have witnessed this multibillion-dollar plan go from conception to expanding globally.
Launched in September 2013, this ambitious initiative aims to improve overland and maritime links between China and the rest of Asia, as well as Europe, the Middle East and Africa. It spans more than 65 countries, which together account for 29 per cent of global GDP and 63 per cent of the world’s population. Four-and-a-half years on, the multi-billion dollar plan is taking shape around the world. An increasing number of projects are moving from planning to implementation, including the Vakhdat-Yovon railway crossing the Central Asian hinterland, to Kunming–Singapore railway connecting China to Southeast Asia, the Hungary-Serbia railway through the heart of Eastern Europe, the Addis Ababa–Djibouti Railway stretching across the hinterland of Africa, as well as Gwadar Port in Pakistan and Piraeus Port in Greece join the junction of the Silk Road on sea and land. The initiative has entered regions as far as New Zealand, Britain and even the Arctic.
These infrastructure investments are allowing China to be more connected with its trading partners than ever. Two-way trade between China and countries along the Belt and Road exceeded 7.4 trillion yuan (around US$1.2 trillion) in 2017, surging 17.8 per cent year on year. Over time, the initiative will act as a catalyst for further commercial opportunities along newly invigorated transport routes.
There has been real progress in developing the financing platforms needed to implement the next stages of the initiative. China’s four major state-owned commercial banks have lent a combined $150 billion up to the end of 2016, over half of all current Belt and Road lending. Beijing has set up several financing vehicles, allocating $50 billion to the Asian Infrastructure Investment Bank, $41 billion to the New Development Bank and $40 billion to the Silk Road Fund. The country is also using green financing (including bonds, loans, insurance and securities) as a way of supporting Belt and Road projects. Around $30 billion of green bonds were issued by China last year – more than one-fifth of the global total, and up from just $1 billion in 2015.
The Belt and Road Initiative could help China capture the higher end of the global value chain. Beijing considers its high-speed railway technology to be the jewel in the crown of its advanced manufacturing industry, and China is home to around 60 per cent of the world’s total constructed high-speed railways. If countries along the Belt and Road embrace Chinese high-speed railway technology, it could become the de facto standard across a vast geographical area.
There are digital opportunities, too. China envisions incorporating the telecommunications and e-commerce sectors into the Belt and Road Initiative. This “Digital Silk Road” would help small and medium-sized enterprises further engage in the global supply chain and reach out to international markets. China's internet giants are already making notable investments in the Southeast Asia across the e-commerce, digital payment, ride-sharing and on-demand transportation sectors.
The Belt and Road Initiative has the potential to transform China’s domestic economy and the global economy over the next decade. Business leaders should be primed and ready to get involved.
Contributed by PETER WONG, Deputy Chairman and Chief Executive, The Hongkong and Shanghai Banking Corporation Limited
