Aimed at enhancing connectivity and economic development throughout Asia, Europe and Africa, the BRI will mobilise a wide array of stakeholders and create significant business opportunities for countries along the way. Among sectors affected by the BRI, transport, energy and soft infrastructure value chains should rank high.
Introduced in 2013 by Xi Jinping during state visits to Kazakhstan and Indonesia, the BRI aims to promote “mutually beneficial” economic development, prosperity and connectivity in China’s neighbouring countries, and as far afield as Europe and Africa. To do so, the BRI’s primary aim is to foster the development (and financing) of “connectivity-enhancing” hard and soft infrastructure across Asia, Europe and Africa as a way to boost local economic growth, and ease the flow of goods, services, capital and people across these geographies. Given its objectives, the BRI has also come to encompass industrial projects, and in particular the setting-up of industrial zones in BRI countries.
The Chinese government has already committed substantial financial resources in support of the BRI—for example, in the form of multilateral and domestic financing for infrastructure and industrial projects. Chinese economic newspaper, Caixin, for example, estimated that by the end of 2016, China’s three biggest state-owned banks (Industrial and Commercial Bank of China, Bank of China, and China Construction Bank) had provided USD225.4 bn in credits to BRI countries for about 800 projects, while CDB and Exim, China’s two outward-looking policy banks, had extended USD200 bn in loans to BRI projects.1 The BRI has also gathered the active support of China’s central and local levels of government, and of China’s state-owned enterprises, which are spearheading the implementation of China’s ambitious initiative—and hope to benefit from it. Beijing has also called for foreign financiers and companies to contribute to China’s new flagship foreign policy initiative. And as a matter of fact, increasing strategic competition in the countries along the BRI is already stimulating investments from other players, such as Japan. All in all, given its scope—both geographically and in terms of objectives—and the traction it has gathered domestically and internationally, the BRI will without a doubt affect a wide range of actors across numerous industrial sectors.
Hard infrastructure opportunities along the BRI
Chief among these sectors will be the infrastructure construction industry. Indeed, as part of its commitment to enhance connectivity across Eurasia and Africa, Beijing plans to finance and participate in the construction or modernisation of all kinds of transport infrastructure along the Belt and Road. This means that a multitude of Chinese but also local companies in the road, railroad, port, urban transport, and airport industries will be mobilised as part of the initiative. Along China’s planned Pan-Asian Railway Network, for example, Chinese companies will be cooperating with local contractors, engineers, and workers to link Kunming to Singapore through rail infrastructure. Within each of the above-mentioned sectors, stakeholders in the planning, design, construction and operation stages will be involved, as will industries directly linked to these sectors and projects, such as input providers in the steel, cement, and rolling-stock sectors, and industries linked to transit-oriented development such as real-estate developers. Finally, to ensure the unimpeded circulation of goods and people along this infrastructure, a series of service providers will be mobilised, such as infrastructure and logistics managers. Indeed, China’s BRI is already encompassing the set-up of logistics hubs and dry ports, such as the Khorgos Gateway on the China-Kazakhstan border. Such hubs might eventually be linked, or supplemented, by the establishment of China-invested and -led industrial cooperation clusters in BRI countries, such as the five industrial parks currently under construction in Ethiopia.2
Bringing energy to BRI countries
The BRI is also directly concerned with energy infrastructure and the power sector. As part of its connectivity goal, it aims (and has already proceeded) to develop oil and gas pipelines throughout Asia, such as the 3,666km Central Asia-China gas pipeline project from Turkmenistan to China. But China is also involved, often with local partners, in more localised energy projects such as wind or solar farms (as in Egypt and Portugal), hydropower projects (such as in Indonesia), coal-fired power stations (such as in Mongolia and Bangladesh), and even nuclear power plants (as in Pakistan). As with the transport industry, all components of the energy value chain will benefit from Beijing’s ambition to stimulate the development of energy infrastructure and power generation capacity in BRI countries. These components include design institutes and contractors for the delivery of large power-generation projects, but also equipment providers such as solar module manufacturers. They also include up- and downstream industries, from raw material extraction to power distribution.
Mobilising players in soft infrastructure
Soft infrastructure is another crucial target of China’s efforts in the context of the BRI. Rather loosely defined by Beijing, the term has come to encompass an array of sectors ranging from communication equipment, and custom- and trade-facilitating services, to “support industries” such as financial services and consulting. In particular, China’s leaders have repeatedly expressed their desire to set up a “digital” or “information” silk road, which would aim to incorporate digital sectors like telecommunications, the Internet of Things, and e-commerce, into the BRI. To do so, Beijing will encourage the construction or upgrade of communication networks in and between BRI countries, and China and Russia have already started building overland cable links between Asia and Europe. Another aim here seems to be the promotion of cross-BRI e-commerce flows, which will require the mobilisation of actors linked to the cross-border flow of goods, services and people. Cooperation and harmonisation between custom institutions would of course be a first step, but shipping and e-commerce companies could also see their international activities expand. JD.com, China’s second-largest e-commerce platform, has already announced a plan to set up more than 20 overseas warehouses, many of which will be in BRI countries. Similarly, e-commerce giant Alibaba hopes to establish a “digital free-trade zone” in Malaysia. More cross-border cooperation projects are to be expected in the field of communication and digitalisation. One further area covered by China’s digital silk road will be “smart cities”. Chinese companies involved in such projects at home, such as ZTE or Huawei, will probably want to take advantage of the BRI to expand their activities into BRI countries, with the help of local players. Finally, to facilitate projects undertaken under the banner of the BRI, a variety of “support” industries will be involved in the initiative. These are likely to include financial sector participants—commercial and development banks, investment funds, but also insurers—in charge of financing, structuring or insuring BRI projects. Legal and consulting entities with expertise in cross-border deals, as well as the above-mentioned sectors, and geographies, will also be mobilised, as will lobbyists in charge of promoting BRI projects and ambitions.
In short, a multiplicity of actors across a wealth of sectors might find themselves directly or indirectly involved in China’s new initiative. Many of them will of course be Chinese companies, encouraged by preferential policies at home and a desire to support Beijing’s flagship initiative. But countless foreign stakeholders will also be involved: local companies in BRI countries which might be invited to partner with Chinese companies and banks to deliver BRI-related projects; and international players willing and able to contribute to China’s highly ambitious initiative.
1 According to Pan Guangwei, executive vice-president of China Banking Association (CBA). Peng Qinqin and Denise Jia, “China State Banks Provide Over $400 Bln of Credits to Belt and Road Projects”, Caixin, 11 May 2017. https://www.caixinglobal.com/2017-05-12/101089361.html
Chief China Economist, HSBC Private capital is essential to fund this huge trading network