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Print Edition> Business
UPDATED: April 7, 2015 NO. 15 APRIL 9, 2015
Road to Greatness
'Belt and Road' action plan will stimulate trillion yuan outbound
By Wang Jun

The National Development and Reform Commission, the Ministry of Foreign Affairs and the Ministry of Commerce issued a long-expected document entitled Vision and Actions on Jointly Building the Silk Road Economic Belt and the 21st-Century Maritime Silk Road on March 28.

Experts estimate that in the next few years, more than 1 trillion yuan ($160 billion) of Chinese investments will be made in countries along the Belt and Road.

According to the document, countries along the Belt and Road have their own resource advantages, and their economies are mutually complementary. Therefore there is great potential and space for cooperation.

Industrial insiders say facilities connectivity, unimpeded trade and financial integration will bring tangible investment opportunities. At the 2015 Boao Forum for Asia held on March 26-29 in south China's Hainan Province, many industrial leaders said they have detected opportunities from the Belt and Road Initiative.

"We can search for new business opportunities by making best of the Belt and Road Initiative," said Lai Xiaomin, Chairman of China Huarong Asset Management Co. Ltd. "We have businesses for asset management, banking, securities, futures and investment funds; and the Road and Belt Initiative as well as the establishment of the Asian Infrastructure Investment Bank have broadened our vision and will bring more opportunities."

Hu Huaibang, Chairman of China Development Bank, vowed to strengthen cooperation within the industry.

"Now we can both grant bank loans to certain projects and offer credit to some banks. We will certainly continue to cooperate with various countries," Hu said. "Now we have established a database covering 900 projects in 64 countries, involving an investment of $890 billion."

The infrastructure industry has also seen significant opportunities.

"Our company has started market surveys or investment projects in over 60 countries along the Belt and Road," Song Hailiang, Vice President of China Communications Construction Co. Ltd., told Economic Information Daily.

According to Song, the company has invested in the Colombo Port City project in Sri Lanka, set up regional headquarters in the Netherlands, participated in highway and railway projects in Central Asian countries, purchased patents through overseas mergers and acquisitions, and established research and development centers in the Netherlands and Singapore.

The same confidence exists within the energy industry. Liu Shaobin, Chairman of Beijing Petroleum Exchange, said the Belt and Road Initiative needs industrial support, while the petroleum industry carries the highest importance.

"The Belt and Road Initiative is a good platform for both outbound investment by Chinese companies and inbound investment by foreign companies," Liu said. "Last year we signed cooperation contracts with some companies from Arabian and ASEAN countries, and we have reached a consensus on cooperation patterns and product supplies. We have also set up an industrial fund to provide financial support to the cooperation."

The Belt and Road Initiative will undoubtedly need a huge amount of investment as well as financial services.

According to an estimation by Zhou Jingtong, a senior researcher with Bank of China, from 2010-20, Asia alone will need $8 trillion of investments in infrastructure. However, countries along the Belt and Road are still not capable of financing this amount. In these countries, the average national savings rate is about 22 percent, lower than half of that in China.

Infrastructure is the most favored sector among investors. Guan Qingyou, executive head of Minsheng Securities' Research Institute, said infrastructure connectivity is an important precondition for the Belt and Road Initiative, and it requires priority among all other tasks. The list of major railway, highway, waterway and port projects for 2015 will soon be released. An analysis of various Chinese provincial government work reports shows that in 2015, investments in infrastructure related to the Belt and Road Initiative will total 1.04 trillion yuan ($170 billion), of which 68.8 percent will be made in railway, highway and airports.

"We predict that infrastructure projects connecting Southeast Asia will be started first, with the Gwadar Port of Pakistan, Hambantota Port of Sri Lanka and other ports along the Indian Ocean becoming the first few strategic ports along the Belt and Road," said Guan. "Major Chinese infrastructure companies, including China Railway Engineering Corp., China Railway Construction Corp. and China Communications Construction Co. Ltd., can take the lead in accelerating infrastructure connectivity."

Just as Zheng Yongnian, Director of East Asian Institute of National University of Singapore, told the Chinese online edition of Financial Times on March 23, Chinese capital and production capacity have become excessive as its economy grows, and going abroad becomes a must for China. According to him, it is Chinese investment, not the Chinese Government, that should go abroad, while the government should simply serve to facilitate the process.

Action Plan for Jointly Building the Belt and Road

The Silk Road Economic Belt focuses on bringing together China, Central Asia, Russia and Europe (the Baltic); linking China with the Persian Gulf and the Mediterranean Sea through Central Asia and West Asia; and connecting China with Southeast Asia, South Asia and the Indian Ocean.

The 21st-Century Maritime Silk Road is designed to stretch from China's coast to Europe through the South China Sea and the Indian Ocean in one route, and from China's coast through the South China Sea to the South Pacific in the other.

China's Regions in Pursuing Opening Up

- Northwest and northeast:

Making Xinjiang Uygur Autonomous Region a key transportation, trade, logistics, culture, science and education center; and a core area on the Belt

Giving full scope to the economic and cultural strengths of Shaanxi and Gansu provinces and the ethnic and cultural advantages of the Ningxia Hui Autonomous Region and Qinghai Province

Advancing the building of the Ningxia Inland Opening-up Pilot Economic Zone

Improving the railway links connecting Heilongjiang Province with Russia and the regional railway network

Advancing the construction of an Eurasian high-speed transport corridor linking Beijing and Moscow

- Southwest:

Giving full play to Guangxi Zhuang Autonomous Region as a neighbor of ASEAN countries and forming an important gateway connecting the Belt and Road

Making Yunnan Province a pivot of opening up to South and Southeast Asia

Promoting the border trade, tourism and culture cooperation between Tibet Autonomous Region and neighboring countries such as Nepal

Coastal regions, and Hong Kong, Macao and Taiwan:

Speeding up the development of the China (Shanghai) Pilot Free Trade Zone

Supporting Fujian Province in becoming a core area of the Road

Building the Guangdong-Hong Kong-Macao Big Bay Area

Promoting the development of the Zhejiang Marine Economy Development Demonstration Zone, Fujian Marine Economic Pilot Zone and Zhoushan Archipelago New Area

Further opening Hainan Province as an international tourism island

Strengthening the port construction of coastal cities

- Inland:

Building Chongqing into an important pivot for developing and opening up the western region

Making Chengdu, Zhengzhou, Wuhan, Changsha, Nanchang and Hefei leading cities of opening up

Accelerating cooperation between regions on the upper and middle reaches of the Yangtze River and their counterparts along Russia's Volga River

Supporting cities such as Zhengzhou and Xi'an in building air hubs and international land ports

Cooperation Priorities

- Facilities connectivity

Pushing forward the construction of international trunk passageways

Increasing connectivity of customs clearance, reloading and multimodal transport

Pushing forward port infrastructure construction and port cooperation

Building platforms and mechanisms for comprehensive civil aviation cooperation and improving aviation infrastructure

Promoting cooperation in the connectivity of energy infrastructure;

Advancing the construction of cross-border optical cables and other communications trunk line networks

Improving spatial (satellite) information passageways

- Unimpeded trade

Improving the customs clearance facilities of border ports and establishing a "single-window" in border ports

Promoting online checking of inspection and quarantine certificates and facilitating mutual recognition of Authorized Economic Operators

Lowering non-tariff barriers

Speeding up investment facilitation and eliminating barriers

Pushing forward cooperation in new-generation information technology, biotechnology, new energy technology, new materials and other emerging industries

Building industrial parks such as overseas economic and trade cooperation zones and cross-border economic cooperation zones, and promoting industrial cluster development

- Financial integration

Building a currency stability system, investment and financing system and credit information system in Asia

Expanding the scope and scale of bilateral currency swap and settlement

Opening and developing the bond market in Asia

Making joint efforts to establish the Asian Infrastructure Investment Bank and BRICS New Development Bank

Setting up and putting into operation the Silk Road Fund as early as possible

Supporting the issuance of Renminbi bonds in China by governments of the countries involved and their companies, as well as financial institutions with a good credit-rating

Strengthening financial regulation cooperation

Encouraging commercial equity investment funds and private funds to participate in the construction of key projects

Copyedited by Kylee McIntyre

Comments to wangjun@bjreview.com

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