China's global development project, the Belt and Road Initiative (BRI), now includes more than two-thirds of the world's countries. As the initiative enters its 5th year, BRI projects are closing infrastructure gaps in developing countries, boosting the economies of host nations and benefiting the Chinese and international firms involved.
In the face of recent concerns, the Chinese government has adjusted its approach:
(1) Participation in BRI projects will become more international and inclusive, featuring much greater private-sector involvement. Furthermore, "Belt and Road" is no longer synonymous with developing countries, and opportunities will increasingly arise in more advanced economies.
(2) China’s focus on higher quality projects will lead to more transparency and less risks, with a greater emphasis on due diligence. Working with international agencies and multinational corporations (MNCs) is another way for China’s lenders to better assess and hedge the associated financial, sovereign and geopolitical risks.
(3) BRI opportunities will continue to emerge in new sectors and geographies beyond infrastructure and energy, with the fast-growing Digital Silk Road set to spur many technology-led projects.
Conclusion: three key insights and predictions
The recalibration of BRI and China’s calls for more international participation in the Initiative present clear opportunities across a range of sectors, from infrastructure and energy to technology and telecommunications. From our experience with BRI projects to date and our analysis of the evolution of the Initiative, we have developed three key insights and predictions for the years ahead:
(1) Although the bulk of BRI projects undertaken to date have been funded and developed by Chinese firms, and SOEs in particular, participation in BRI projects will become more international and inclusive, featuring much greater private-sector involvement. It is also clear that the term “Belt and Road” is no longer synonymous with developing countries, and as the Initiative continues to spread across the world, opportunities will increasingly appear in more advanced economies, such as Italy. At the same time, the opportunities in Asia and Africa will continue to deepen beyond sectors such as energy, resources and infrastructure.
(2) China’s focus on quality projects will also lead to more transparency and a concurrent reduction in the risks involved. In this regard, consultancies are well-placed to conduct due diligence of opportunities to help their clients avoid “buying wrong” or “buying expensive” when making investments. Consultancies with a wide international presence across BRI countries are especially suited to help navigate differing tax and regulatory requirements, as well as assess political and policy risks, not to mention the potential impact of cultural differences, to safeguard and maximize their clients’ overseas investments. Indeed, Zhou Xiafei, deputy secretary general of China’s National Development and Reform Commission, has stressed that BRI projects would benefit from involvement by international professional services, and management and financing firms.This can help MNCs and China’s SOEs navigate the various challenges and find the most suitable BRI opportunities.
(3) Finally, BRI opportunities will continue to emerge in new sectors and geographies, with technology an area to watch as the Digital Silk Road progresses. The official “Belt and Road” portal, for instance, lists a slew of recent technology-led projects, including a self-driving tractor run on Chinese technology being trialed in Tunisia, and foreign companies being linked with Chinese suppliers through Chinese B2B platforms such as Osell and Alibaba, dubbed “matchmakers” along the Belt and Road.
The focus now is very much on assessing each project on its individual merits, mindful of the overarching goal of spreading prosperity and inclusiveness.
To be sure, BRI is the most ambitious geo-economic vision in recent history, although it has also been described as the “best-known, least-understood” foreign policy effort underway. China is striving to address the need for greater understanding by devoting considerable time and effort to organizing BRI events and conducting outreach. In the process, a better understanding of BRI’s motives and potential has been spreading, and greater participation has naturally followed. This, in turn, will take the Initiative even further.
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