Download One Belt One Road Business and Economic perspectives

One Belt One Road
Business and Economic perspectives
March 2, 2017 China Forum
Carter Center/Hong Kong Association of Atlanta
Henry Yu
What is One Belt One Road (OBOR)?
*Not a new concept, but a natural extension of the Old Silk Road
*Also called Belt Road Initiative, introduced in 2013 by President Xi
*People also refer to Economic Belt plus Maritime Silk Road
*Even in 1990s and mid-2,000, cooperation already existed
(China/Thailand/Laos cooperation with ADB to build Kunming-Bangkok
Highway, 2005/2006 Huawei and ZTE projects in Afghanistan and Tajikistan)
* 19th century Russia building the Trans-Siberia Railway connecting Baltic Sea
and the Pacific
*Vast impact-over 60 countries, >40% of world GDP, about 50% global trade,
75% of energy resources
*1820 Asia>50% of world GDP; 18% in 1950s; 43% in 2008
*ASEAN is the nucleus of the Maritime Silk Road
One Belt One Road
*Big initiative of China, but broader term, continuation of infrastructural project
investments in poorer Emerging Market economies (USA and the West have been
involved in many years, but the last 20 plus years, activities have been negligible)
*A $8T GAP that China and other countries (Japan, India, S Korea, Singapore,
Europe particularly in ASEAN) trying to participate in promoting and improving
economies of Emerging Markets
*For China, the best region to succeed is in ASEAN as OBOR is too big an initiative
involving so many different parts of the world
*We cannot separate the Geo-political from the Economic aspects of OBOR (other
countries are also using check-book policy-USA, Japan, India)
*Historically, Asian Development Bank (ADB), World Bank (WB) and European Bank
for Reconstruction Development (EBRD) are heavily involved in financing
infrastructural projects in EM. But that is not adequate due to limitation of lending
(ADB and WB combined annual lending limits are less than $60B)
One Belt One Road-financing of projects
*Set up of BRICS New development Bank and Asian Infrastructure Investment Bank
(AIIB) to provide financing (finance and funding currently restricted by lending
capacity of WB, EBRD and ADB)
*China has set up various Funds to help target OBOR projects-$40B Silk Road Fund,
Middle East/China Joint Sovereign Fund of $10B, $10B China/Africa Special Fund
*Cooperation among AIIB, ADB, WB and EBRD have started in 2016
*The Top 10 Chinese commercial banks have already set up lending limits
supporting OBOR project loans and financing
*Top 7 banks are beefing up their resources in HK to target growing OBOR projects
in ASEAN (BOC names its HK branch as Center for ASEAN biz under OBOR)
*HK will play a key role in facilitating transactions/projects under OBOR (finance,
treasury, multi-currency funding, ECM & DCM, dispute arbitration, and related
services)-IFFO set up in 2016
OBOR-over 1,000 projects announced
*$7B 420km High Speed Rail connecting Kunming to Vientiane, connecting China to Laos
*Jakarta/Bandung High Speed Rail of 140km; $1.8B Jakarta/Surabaya Rail of <800km
*Laos $750million satellite project; CN(Guangdong) investing in oil refinery in Myanmar
*870km Rail connecting north Thailand and Bangkok
*1,500km Thai/Malaysia Rail connecting KL and BKK
*China/Iran Rail line completed 2017; $3.4B 750km Rail project in Ethiopia
*$10B for China to develop deep sea ports in Malaysia connecting 10 ports in China
*$50B CPEC (China Pakistan Economic Corridor), including China/Pakistan Railway that
connects China to Arabic Sea
*Bangladesh-China-India-Myanmar Economic Corridor; Bangladesh 6 Rail projects to be
built by CN
*New Delhi-Mumbai Rail project; Pakistan $11B Rail project (AIIB, ADB, UK coop)
*Bangladesh Dhaka/Payra Rail (240km)consortium of British design and operator, with
Chinese civil engineering/contractor
*$470mil Manila Flood Control project and $750mil bus Rapid Transit
*350km Malaysia/Singapore Railway (China and Japan bidding war)
OBOR-Opportunities for USA companies
China shares borders with 13/14 States including Russia, Mongolia, Vietnam,
India, Myanmar, Nepal, North Korea, etc. OBOR initiative is simply so grand
that there are risks and challenges involving China and OBOR countries.
China can become the engine of growth to share economic and investments
with and in OBOR countries. But it is rather complex on geo-political front,
border disputes, and vastly differences in regions and countries, inadequate
finance/funding, and lack of standard governance and rules and regulations
in project disputes involving multi-party relationships. It is a huge
undertaking of China to spend billions of dollars on infrastructures, majority
related to building rails, road, and providing electricity to poorer economies.
While OBOR is a China initiative, it does include competition (which is good)
and cooperation from countries like Japan, South Korea, UAE, India, Europe
and even USA.
OBOR projects create needs for host countries to increase its imports of
goods and services (great for USA exports and project investment)!
OBOR-Opportunities for USA companies
Infrastructure projects need
*Machine tools, heavy equipment, monitor system, design, services
and management, civil engineering, maintenance and operation, port
building and management, aviation equipment and parts
*Finance and Insurance-project loan, credit enhancement, lease
finance, liability, property and casualty insurance
*Legal and Accounting services, Property valuation
OBOR offers opportunities in electronics, high tech, services
(marketing, branding, supply chain), E-commerce (digital economy and
IOT), telecom, energy, transport, health care/medical/hospital,
agriculture, tourism and hospitality, training academy, just to name a
few!
Conclusion
*A China initiative that opens doors for everyone
*OBOR activities incur risks-cross border, commercial, contract dispute,
multi-party relations, political and currency
*OBOR is not necessary for big USA companies as many of the host
country private sponsors are not that big by international standards
*Grow your exports in new markets!
Thank you!