Up and running? Opportunity and risk along China’s Belt and Road Initiative

Up and running? Opportunity and risk along China’s Belt and Road Initiative is an Economist Corporate Network (ECN) report, commissioned by the Singapore Business Federation. The ECN performed the research and wrote the report independently. The findings and views expressed in this report are those of the ECN alone and do not necessarily reflect the views of the Singapore Business Federation.

The decision in 2013 by the Chinese President, Xi Jinping, to promote the New Silk Road Economic Belt and 21st Century Maritime Silk Road, together often known as “One Belt, One Road” (OBOR), follows in a long line of ambitious infrastructure projects in China. However, the international nature of this initiative reflects a more strategic approach which may ensure its long-term survival and success. Chinese state-owned enterprises (SOEs) and private companies alike have lent support to the project, which is now promoted as the “Belt and Road Initiative” (BRI).
 
The BRI has also prompted China to set up several financing vehicles, such as the multilateral Asian Infrastructure Investment Bank (AIIB) and the Silk Road Fund (SRF), to provide loans for infrastructure projects in Asia. Beijing officially launched the AIIB in October 2014, with the United Kingdom, France, Germany, Italy and 21 other countries pledging their support throughout 2015. Notably, the United States and Japan withheld support for the bank, seeing it as a geo-financial rival to established institutions such as the Asian Development Bank (ADB) and the International Monetary Fund (IMF). By March 2017 the AIIB had increased its membership to 70, including every G7 country except Japan and the US.
 
Mr Xi’s aim with the BRI is to re-establish China’s ancient trading routes with neighbours and countries further afield. The initiative covers more than 60 countries, and is composed of an overland “Silk Road Economic Belt” linking China to Europe via Central Asia and the Middle East, alongside a “21st Century Maritime Silk Road” connecting China to Europe via South-east Asia, South Asia and East Africa.
 
China has championed the BRI as a vehicle for connectivity, mutual development and cooperation. In Mr Xi’s own words, “in pursuing the Belt and Road Initiative... what we hope to create is a big family of harmonious co-existence”. For the region, the potential benefits are substantial; the World Bank has pointed out that the BRI could stimulate Asian and global economic growth and make it more sustainable. At the same time, for China, the BRI has the added attraction of supporting its domestic economy by boosting trade and creating new business opportunities for Chinese companies. Some foreign observers have suggested that the BRI is a convenient outlet to export the overcapacity in some of China’s struggling industries, such as steel, cement, construction, shipping rolling stock and heavy industry. Moreover, the initiative will also develop channels for financing and open up routes for the flow of capital goods.
 
The sums, and the ambitions, are immense. But beyond the headlines and rhetoric, how does the business world view the initiative? Where are the opportunities, what are the risks and challenges, and what are the expectations for the future?
 
This report from The Economist Corporate Network combines analysis from The Economist Intelligence Unit with the results of a survey of business leaders within the region to examine progress with, and perceptions of, the BRI. The survey attracted 77 respondents from a broad mix of industries, and generally from large multinational companies: 68.5% had global revenues ofmore than US$1bn (see figure 9 on page 15 for more data on the participants). 
 

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Up and running? Opportunity and risk along China’s Belt and Road Initiative is an Economist Corporate Network (ECN) report, commissioned by the Singapore Business Federation. The ECN performed the research and wrote the report independently. The findings and views expressed in this report are those of the ECN alone and do not necessarily reflect the views of the Singapore Business Federation.
 
This paper is informed by a survey of senior business leaders in the region conducted online throughout June 2017. 
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