The $900bn question: What is the Belt and Road initiative? (ps. it could turn out to be the largest ever infrastructure project with close to a trillion dollars being invested across the globe).
The initiative was officially launched in September 2013 when President Xi used a speech at a university in Kazakhstan to call for the creation of a “Silk Road Economic Belt”. The project was later expanded and re-branded with its current name. Foreign minister Wang Yi has described the initiative as a “symphony of all relevant parties”.
The Belt and Road initiative has two main prongs: one is called the ‘Silk Road Economic Belt’ (the belt) and the other the ‘21st Century Maritime Silk Road’ (the road).
For many countries in the region, China is by far the biggest source of financing: Beijing’s Export and Import Bank of China alone lent $80 billion in 2015, compared with more than $27 billion from the Asian Development Bank. The Asian Development Bank says infrastructure development in Asia and the Pacific will exceed $22.6 trillion through 2030, or $1.5 trillion per year. In a recent report, “Meeting Asia’s Infrastructure Needs” issued in February, the estimate rises to more than $26 trillion, or $1.7 trillion a year when costs for climate change adaptation and mitigation are included.
In concrete terms, the Belt and Road initiative is an immensely ambitious development campaign through which China wants to boost trade and stimulate economic growth across Asia and beyond (68 countries and still counting). It hopes to do so by building massive amounts of infrastructure connecting it to countries around the globe. By some estimates, China plans to pump $150bn into such projects each year. In a report released at the start of this year, ratings agency Fitch said an extraordinary $900bn in projects were planned or underway. Chinese involvement in building railways, ports, roads, dams and industrial corridors is helping to expand its economic and geopolitical sway across Asia, the Middle East, Europe and Africa. And to be part of this initiative is to be able to secure one’s company growth for the next decade. Love Clicks Future (Worldwide) Holding Limited is one such company to be in such an enviable position with its vast involvement in the Freight and logistics business (containers) and expertise in the Internet of Things (IOT).
Businesses need to understand the financial and economic implications of a co-ordinated infrastructure spending program that spans up to 65 countries.
This presents a golden opportunity for all countries involved and China to cooperate and push forward the One-Belt-One-Road (OBOR) initiative in the region; stimulating governments, multilateral organisations and the private sector to join forces to cultivate international cooperation and shared economic advancement.
OBOR will connects businesses and people around the world at reduced costs. This is a natural desire of economies craving a better tomorrow, particularly for an increasingly integrated Asia. Intra-regional trade in Asia has surged in recent years to levels comparable with the Eurozone economies. Furthermore, high-level cross-border investments reflect the integration of complementary production capabilities and resources to serve both traditional Western consumers and surging Asian consumption.
OBOR’s benefits are clear. In the long run, it promises a rosy outlook: affordable connectivity that will lead to economic cooperation and innovation. In the short run, infrastructure investment will immediately stimulate global growth.