The Belt and Road Initiative and the Importance of Prudence

THE Belt and Road Initiative has been one of the hottest topics in shipping since its launch by Chinese president Xi Jinping in 2013.

News ID: 74192

Date: 29 May 2017 - 14:03

According to MANA, for many, the grand project to improve infrastructure and logistics links in Asia, the Middle East, Europe and Africa present abundant investment opportunities. But the reality may disappoint them.

Enhanced economic developments and transports across continents would obviously benefit shipping demand, not least from the macro side. But companies — especially non-Chinese ones — better think twice before rushing to label their investment plans as BRI projects to get hot Chinese money.

Prudence, as ever, would be the right approach. Shipping should see the BRI as a situation to adapt to, rather than an opportunity to take advantage of.

This is because the BRI has always had multiple purposes for Beijing. As its full name, 'Silk Road Economic Belt and Maritime Silk Road', suggests, one of them is to revive China’s ancient glory — not just in trade, but also as a civilized superpower.

It is easy to measure infrastructure projects’ profitability and utilisation. It is much harder to gauge how much China’s

China had committed $40bn to the Silk Road Fund before promising another Yuan100bn earlier this month. As of mid-May, the fund only signed up for $6bn investments.

The much-hyped Asian Infrastructure Investment Bank, which has 70 member nations, has only committed $1.7bn in nine BRI projects since commencing its operation in January 2016.

Two policy banks have performed relatively better, with China Development Bank claiming to have lent $160bn by end-2016 and China Eximbank provided Yuan700bn as of mid-May. They did not specify whether the numbers refer to total outstanding loans or include historical figures, though.

The expansion of China’s soft power has also hit a bumpy road. The Belt and Road forum earlier this month was attended by representatives from more than 130 countries. But only 30 countries signed a joint communique to support climate change actions and global trade, which are not even controversial causes.

And perhaps that is what shipping should adjust to. From a long-term perspective, China’s influence in terms of trading power will grow further. Rather than the BRI itself, such economic progress is what brings about opportunities and challenges.

Hailing the BRI as “project of the century”, Mr Xi obviously has a lofty vision of China for the decades to come.