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The Belt and Road Initiative
www.lehmanbrown.com

This article was prepared by LehmanBrown International Accountants. Special thanks to the marketing intern Lilly Drinkwater’s contributions.
This article is intended for general information purposes only and is not intended to provide, and should not be used in lieu of professional advice. The
publisher LehmanBrown assumes no liability for readers’ use of the information herein and readers are encouraged to seek professional assistance with
regard to specific matters. Any conclusions or opinions are based on the specific facts and circumstances of a particular matter and therefore may not
apply in all instances.
 The Belt and Road Initiative

Table of Contents

Background ............................................................................................................................. 2

World Institutions and the Belt and Road Initiative................................................................... 3

The ‘Corridors’ in Detail ........................................................................................................... 4

Countries involved in the Initiative ......................................................................................... 10

Opportunities the Belt and Road Initiative can offer Foreign Investors .................................... 14

How the Belt and Road Initiative Will Impact China’s Economy ............................................... 17

Latest Updates on the Belt and Road Initiative........................................................................ 19

How LehmanBrown Can Help ................................................................................................. 20

Bibliography .......................................................................................................................... 21

1
 Background

The ‘Belt and Road Initiative’ (BRI) or ‘One Belt, One Road’ (OBOR) is a project launched by
China to develop countries and improve global connectivity. First unveiled in 2013 by
Chinese President Xi Jinping, the initiative has and continues to grow in scale and popularity.
The initiative is focused on creating networks that will allow for a more efficient and
productive free flow of trade as well as further integration of international markets both
physically and digitally.

BRI is comprised of the ‘21st Century Maritime Silk Road’ and the ‘Silk Road Economic Belt’
together they will connect more than 65 countries making up over 62% of the world’s
population, around 35% of the world’s trade and over 31% of the world’s GDP. It will take
the form of a series of highways, railways and ports as well as facilities for energy,
telecommunications, healthcare and education.

The initiative includes 6 international ‘corridors’. These include; (1) ‘The new Eurasia land
Bridge’, (2) ‘The China-Mongolia-Russia economic corridor’, (3) ‘China-Central Asia-West
Asia economic corridor’, (4) ‘China-Indochina Peninsular Economic Corridor’, (5) ‘China-
Pakistan Economic Corridor’, (6) ‘Bangladesh-China-India-Myanmar Economic Corridor’.

BRI focuses on five main goals. (I) ‘Policy Coordination’; meaning the initiative intends to
encourage Countries to jointly work and cooperate with each other to achieve projects. (II)
‘Cultural Exchange’; this being the aim to promote people-to-people bonds and friendly
interaction between enterprises as well as deeper cultural understanding so as to further
international cooperation. (III) ‘Financial Integration’; BRI is designed to enhance monetary
and financial cooperation when monitoring and dealing with risk as well as general financial
interactions. In addition, it looks to expand currency exchange and scope. (IV) ‘Trade and
Investment’; through BRI cross-border investments and trade are aimed at being made
easier and more cooperative between countries on the Belt and Road, promoting economic
integration. (V) ‘Facilities Connectivity’; this is the focus on building facilities to enable
greater connectivity between countries on the Belt and Road e.g rebuilding and developing
ports, removing barriers, fixing roads etc. As well as creating better networks through the
development of highways, railways and fibre-optic lines between countries along the Belt
and Road.

According to Chinese President Xi Jinping as of January 2017 more than 100 countries and
international organisations have responded well to the initiative and over 40 have signed
cooperation agreements. Already, over $900 billion USD of BRI related projects are under
way. However, it is worth noting that The Asian Development Bank estimate that by 2030
the initiative will cost over $22.6 trillion. None the less the Initiative has received an
immense amount of positive reactions.

In collaboration with the Belt and Road Initiative the Asian Infrastructure Investment Bank
(AIIB) was established with its headquarters in Beijing. AIIB is, (according to its official
website) “a new multilateral financial institution founded to bring countries together to
address the daunting infrastructure needs across Asia”. It was formally opened in January
2016 and to date has 56 member states and 26 prospective members including all BRICS

2
countries as well as England, France, Italy, Germany and Hong Kong. China is the largest
shareholder with 26.06% of the votes. It is the only party with more voting power than the
combined power of the 14 EU members of AIIB who hold a total of 19.04% of voting rights.
In 2016, the bank committed $1.73 billion USD to nine development projects along the Belt
and Road, 6 of which are in collaboration with lenders including the World Bank and the
Asian Development Bank. The bank is credited with further connecting China to the rest of
the world through international financial transactions and funding infrastructure.

World Institutions and the Belt and Road Initiative

The United Nations (UN)

In May 2017 at the ‘Belt and Road Forum for International Cooperation’, the Secretary
General of the UN declared his support for the initiative. Quoting a famous Chinese saying
he proclaimed that; “Building the road is the first step towards prosperity”. This follows on
from September 2016 where the United Nations Development Programme (UNDP) and the
People’s Republic of China (PRC) signed a ‘Memorandum of Understanding’ (MOU) on
cooperation over the Belt and Road Initiative. This is a strategic cooperation designed to
speed up and increase the likeliness of achieving both BRI and the 2030 ‘Agenda for
Sustainable Development’. Following on from the MOU, an ‘Action Plan’ for the Belt and
Road Initiative was signed by both parties in May 2017. Within the speech at the 2017
Forum, the Secretary General proclaimed that; “For countries yearning to become more
integrated with the global economy, it (BRI) can promote access to markets.”

The World Bank group

The initiative has received both verbal and monetary support from the World Bank Group.
In May 2017, the World Bank Group’s president Jim Yong Kim announced that the World
Bank Group were committed to paying $86.7 billion USD towards development and
connectivity projects in BRI countries. In the words of Jim Yong Kim; “The Belt and Road
Initiative has potential to lower trade costs, increase competitiveness, improve
infrastructure, and provide greater connectivity for Asia and its neighbouring regions.”

The International Monetary Fund (IMF)

The IMF is increasingly recognising China as a force to be reckoned with on the global
economic stage as is evident by its adding the Renminbi to the basket of ‘special drawing
rights’ (SDR) in October 2016. Other currency in this basket include; US Dollar, Yen, Euro and
Sterling. China is the first emerging-market currency to be included in the SDR basket. This
action promotes the credibility of RMB and thus makes it more likely to be utilised by ‘Belt
and Road’ countries.

The European Union (EU)

There is an agreed EU-China connectivity platform which involves cooperation on
investment projects (predominantly on the Belt and Road). In June 2017, the 19th summit

3
for the EU and PRC was held. This resulted in developments on the extent of their
cooperation. Developments were focused on the field of transport connections between the
two and cooperation on ‘green’ transport solutions. Further movements were also made
regarding; “concrete projects based on agreed criteria including sustainability, transparency
and a level-playing field.” (In the words of the EU’s official website). The European
Investment Fund and the Silk Road Fund also signed an MOU committing €250 million from
each fund towards private equity and venture capital funds.

The ‘Corridors’ in Detail

4
Key Port Cities:
I. Kuantan (Malaysia)
II. Kyaukpyu (Myanmar)
III. Jakarta and Batam Island (Indonesia)
IV. Colombo and Hambantota (Sri Lanka)
V. Gwadar (Pakistan)
VI. Djibouti (near red sea)
VII. Mombasa (Kenya)
VIII. Piraeus (Greece)

The Corridors:
1. ‘The New Eurasia Land Bridge’

This corridor, as proposed by China, will take the form of an international railway line from
China’s Jiangsu province essentially in a horizontal line west to Rotterdam in Holland.
According to plans it will be 11,800 km long and will serve over 30 countries.

Rotterdam

Lianyungang

Along this corridor, China has already opened four freight train routes. These include a
route from Chongqing to Duisberg (Germany), a direct route from Wuhan to Mēlník to
Pardubice (Czech Republic), a route from Chengdu to Lodz (Poland) and one from
Zhengzhou to Hamburg (Germany). In addition, along these routes China has issued the
policy “one declaration, one inspection, one cargo release” to improve efficiency and ease.
Further construction projects of power transmission lines, highways and ports are
progressing steadily.

2. ‘The China-Mongolia-Russia Economic Corridor’

This includes the three countries mentioned and is focused on two main routes; one being:
Beijing-Tianjin-Hebei region-Hohnot-Mongolia-Russia and the other being: Dailan-Shenyang-
Changchun-Harbin and Manzhouli to Russia’s city Chita.

5
As far as the development of this corridor there were two major breakthroughs. First, in
September 2014 the three Heads of State of the countries in question met at the Shanghai
Co-operation Organisation (SCO) Dushanbe summit. Here they agreed on a tripartite
cooperation based on bilateral ties. In addition, they agreed to renovate Russia’s Eurasian
Land Bridge and potentially develop Mongolia’s Steppe Road. The intention of their
agreement was to strengthen railway and highway connectivity, advance customs clearance,
transport facilitation and promote cross-national cooperation. The second breakthrough
was in July 2015 at a second summit held in Ufa in which the ‘mid-term road map for
Development of trilateral Co-operation between China, Russia and Mongolia’ was formally
adopted. In June 2016, the three countries created a development plan to follow through
with. Further agreements were signed in the Belt and Road initiative forum held in May
2017. In August 2016, a ceremonial delegation of trucks from the three countries was sent
out to test the proposed corridor.

3. China-Central Asia-West Asia Economic Corridor

This corridor is from Xinjiang to Alashankou to the

railways of Central and West Asia to the Mediterranean
Coast and finally the Arabian Peninsula. The corridor
mainly covers; Kazakhstan, Kyrgyzstan, Tajikistan,
Uzbekistan, Turkmenistan in Central Asia and Iran and
Turkey in West Asia (although in total including 17
countries in West Asia). This corridor generally follows
the path of the Ancient Silk Road.

The most significant movement in developing this

corridor was in June 2015 at the ‘Third China-Central Asia Co-operation Forum’ held in
Shandong. Here a joint declaration was signed by China and the 5 central Asian countries
committing to ‘jointly building the Silk Road Economic Belt’. In 2016, the AIIB approved a
loan of $27.5 million USD Dushanbe-Uzbekistan Border Road improvement project in
Tajikistan. In 2017, the rehabilitation of Nurek hydropower plant in Tajikistan was
announced.

6
 4. China-Indochina Peninsular Economic Corridor (CIPEC)

This route is from the Pearl River Delta and goes west along the Nanchong-Guang’an
Expressway and Nanning-Guangzhou high speed railway via Nanning and Pingxiang to Hanoi
and Singapore. It links China with the Indochina peninsular and goes through Vietnam, Laos,
Cambodia, Thailand, Myanmar and Malaysia.

As far as advances go, in December 2014 during the ‘Fifth

Leaders Meeting on Greater Mekong Sub-regional’ in
Bangkok, Chinese Premier Li Keqiang proposed ways to
deepen ties with the 5 countries in the Indochina Peninsular.

Nine cross-border motorways in the area of the Greater

Mekong Subregion are currently under construction. In the
South, China has funded and built various roads in several
regions of Indonesia. The Kunming-Singapore High-speed Rail
network is a project designed to connect China to Indochina
through 3 high-speed railway routes; East, via Hanoi, Ho Chi
Minh, Phnom Penh and Bangkok, Central (via Vientiane,
Bangkok, Kuala Lumpur and Singapore) and West, (via
Mandalay, Yangon and Bangkok). Most of this railway project within China is already
complete and the railway is in operation in parts of Vietnam. Western segments are
currently under construction whilst Malaysia and Singapore are jointly upgrading sections
from Thailand to Singapore.

Within this corridor there are many plans for Air route expansion and integration ASEAN
and China have already made a deal to allow Chinese airplanes to use ASEAN gateway city
airports. This is in addition to the ASEAN ‘open skies policy’, a policy which all ASEAN
countries have a ratified agreement except for Indonesia, Laos and the Philippines who are
still in the process of fully enacting it. Currently there are developments in the linking of
Southeast Asian ports to major Chinese cities. The ASEAN region has a lot of potential for
untapped coal, oil and gas which are likely to be utilised within next 10 years. China already
has many projects in this area underway for example, in Laos, China’s Three Gorges
Corporation has completed two hydropower projects.

Opportunities and Challenges

This corridor is made of ASEAN members most of whom already have a series of
exceptionally well developed economic agreements, this will make trade easier. With the
development of these countries there are many opportunities to develop the banking,
finance and other professional services sector particularly since Cambodia, Laos and
Myanmar are revising regulations to encourage growth in this sector. Furthermore, regional
institutions like the Asian Development Bank (ADB) are encouraging sustainable and
efficient agriculture within this region. However, China’s ties with Indochina are tense which
may put a halt on the initiative in this corridor. For example, various CIPEC projects have
been delayed due to disagreements over money.

7
 5. China-Pakistan Economic Corridor

This route is 3000 km long and starts in Kashgar ending in Gwadar, connecting the Silk Road
Economic Belt in the North and the 21st Century Maritime Silk Road in the South.

In April 2015 both countries signed a joint declaration which stated that the two countries
would be proactive in their joint projects that are designed to further connect the two
countries. China has already invested $62 billion into the China-Pakistan economic corridor.

Along this corridor there is the plan to make Gwadar a special economic zone: a ‘new Dubai’.
The Gwadar port is central to the corridor with China investing £1.3 billion in order to
develop it into a deep-sea port which will be managed by China under a 43 year lease
granted to Chinese Overseas Ports. With the hopes to make Gwadar into a ‘new Dubai’
there are plans to turn it into an oil city with petroleum refining zone as well as hubs for
mining and minerals, agriculture, food processing, technology and advanced manufacturing.
There are also plans for a new Gwadar International Airport and Chinese investment in
energy and water infrastructure. Furthermore, China is hoping to develop tertiary sectors
and residential projects in Gwadar e.g education, business services, retail and leisure
elements. In addition, there are plans for a Gwadar-Kashgar pipeline and transport network.
This will be a network of railways, road, telecommunications and energy supply. The oil
pipeline will cover 17% of China’s oil imports. It will be financed by China and built by
Pakistani Frontier Works Organisation however, it will be technically difficult due to
mountainous terrain.

Over half of the investments in this corridor will be focused on energy projects in order to
combat Pakistan’s energy shortage. These projects are expected to double Pakistan’s
electricity capacity. China has already invested much in coal fired, nuclear energy and green
energy. Current developments include what is set to be the world’s largest solar plant in
Bahawalpur, a hydropower plant in Karot, a wind power plant in Jhimpir, two nuclear power
stations near Karachi and a major coal-fired power plant is being planned in Qasim which is
aiming at providing around 20% of Pakistan’s energy shortfall.

8
Opportunities and Challenges

The Gwadar port will require technical and logistical investment, technical assistance in
ports and petroleum refining zones as well as general shipping and maritime services. For
the nuclear, solar and wind power plants there is a demand for companies specialised in
design, construction and efficient maintenance. The Gwadar-Kashgar pipeline needs
technical expertise to overcome mountainous technical issue

However, there have been previous deals along this corridor that have fallen through
previously due to issues of corruption and lack of transparency. Furthermore, there are
issues between the Pakistani central government and local governments not cooperating as
well as concerns over security across the country.

6. Bangladesh-China-India-Myanmar Economic Corridor

This route includes the four countries mentioned with an emphasis on India. This corridor
will cover 9% of the planets land mass and 440 million people. The main part of the corridor
is a 2,800-km route running as follows; Kolkata-Dhaka-Mandalay-Kunming. It will take the
form of a series of railways, motorways, airways, waterways and telecom networks.

In May 2013 China and India jointly proposed building this corridor together. In December
2013, the ‘Working Group’ of the corridor met in Kunming. Here official representatives of
the four countries embarked on in-depth discussions. Following this the countries signed
meeting minutes agreeing to the ‘Bangladesh-China-India-Myanmar Economic Corridor Joint
Study Programme’ establishing roots for cooperation between the four countries.

Bangladesh
Bangladesh’s ‘Vision 2021’ proposed by the Bangladeshi government is focused on creating
links with its neighbours as a main priority. In Bangladesh, the main area of investment will
be energy, telecommunications and agriculture. Already, large transport infrastructure
projects are being carried out such as Chinese companies building a £3.6 billion railway from
Dhaka to Jessore. Energy infrastructure is also being developed, Bangladesh-China power

9
company ltd are focused on building £1.3 billion coal-fired power plant in South Dhaka
furthermore, the AIIB have approved a £133 million loan for Bangladesh to expand
electricity into rural areas

India
In 2015 China and India signed a £17.7 billion trade agreement with a focus on renewable
energy, steel, transport infrastructure and real estate sectors e.g Chinese company Wanda
Group are building an £8 billion industrial park in Haryana near Delhi.

Myanmar
Here there is a large twin gas and oil pipeline project from the port of Kyaukpyu to Guanxi
and Yunnan. The gas pipeline is already in use and the oil pipeline opened in April 2017.
China is highly invested in Kyaukpyu and have developed the ‘Kyaukpyu Special Economic
Zone’ including a deep-sea port at Kyaukpyu which is under development led by Chinese
CITI Group Corporation. China led power and energy projects across Myanmar are already in
action as is demonstrated by the £2.4 billion refinery in the South East which was granted
approval in 2016

Opportunities and challenges

Within this corridor there are issues over environmental concerns and security issues in all
countries within the corridor. In addition, it is the least developed corridor. That being said,
there are long-term opportunities in Shipping and Maritime services as well as technical and
logistical support.

Countries involved in the Initiative

NB: The Belt and Road initiative is open to all and not limited to the countries listed below,
as the official action plan states “the Initiative is open for cooperation. It covers, but is not
limited to, the area of the Ancient Silk Road. It is open to all countries, and international and
regional organizations for engagement…”.

Countries along the Belt and Road:

Region Country
East Asia China, Mongolia
Southeast Brunei, Cambodia, Indonesia,
Asia Laos, Malaysia, Myanmar,
Philippines, Singapore, Thailand, Timor-Leste, Vietnam
Central Asia Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan
Middle East Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar,
and North Saudi Arabia, Palestine, Syria, United Arab Emirates, Yemen
Africa
South Asia Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan,
Sri Lanka
Europe Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria,

10
 Croatia, Czech Republic, Estonia, Georgia, Hungary, Latvia, Lithuania,
Macedonia, Moldova, Montenegro, Poland, Romania, Russia, Serbia,
Slovakia, Slovenia, Turkey, Ukraine
Source: Industrial Cooperation between Countries along the Belt and Road, China International Trade Institute. The countries are grouped
based on World Bank’s classification by region.

Countries who have participated in the initiative

This is a list of countries who have shown interest in the initiative either through joining the
Asian Infrastructure Investment Bank (AIIB), developing infrastructure, or any other
cooperative interactions with China. NB. ‘AIIB signatory’ means ‘member of AIIB’ thus
meaning they hold a percentage of the votes as shareholders.

Region Country Form of participation/ cooperation

East Asia South Korea AIIB signatory
South Asia Afghanistan Expressed interest in deepening cooperation with
China under BRI
Bangladesh AIIB signatory
India AIIB signatory
Maldives AIIB signatory
Nepal AIIB signatory
Pakistan AIIB signatory
Sri Lanka AIIB signatory
South East Asia Cambodia AIIB signatory
Hong Kong AIIB signatory
Indonesia AIIB signatory
Laos AIIB signatory
Malaysia AIIB signatory
Myanmar AIIB signatory
Philippines AIIB signatory
Singapore AIIB signatory
Thailand AIIB signatory
Timor-Leste Expressed interest in deepening cooperation with
China under BRI
Vietnam AIIB signatory
Central Asia Kazakhstan AIIB signatory
Kyrgyz Republic AIIB signatory
Tajikistan AIIB signatory
Uzbekistan AIIB signatory
Middle East and Algeria Deepening bilateral cooperation with China under BRI;
North Africa Transport infrastructure cooperation
Bahrain Expressed interest in deepening cooperation with
China under BRI
Djibouti Welcomed by China to join BRI
Egypt AIIB signatory

11
 Iran AIIB signatory
Israel AIIB signatory
Jordan AIIB signatory
Kuwait Expressed interest in deepening cooperation with
China under BRI
Morocco Deepening bilateral cooperation with China under BRI
Oman AIIB signatory
Saudi Arabia AIIB signatory
Tunisia Deepening bilateral cooperation with China under BRI
United Arab AIIB signatory
Emirates
Qatar AIIB signatory
Europe Armenia Expressed interest in deepening cooperation with
China under BRI
Austria AIIB signatory
Azerbaijan AIIB signatory
Belgium Deepening bilateral cooperation with China under BRI
Cyprus Expressed interest in deepening cooperation with
China under BRI
Denmark AIIB signatory
Finland AIIB signatory
France AIIB signatory
Germany AIIB signatory
Greece Expressed interest in deepening cooperation with
China under BRI
Hungary AIIB signatory
Iceland AIIB signatory
Ireland Expressed interest in deepening cooperation with
China under BRI
Italy AIIB signatory
Luxembourg AIIB signatory
Malta AIIB signatory
Netherlands AIIB signatory
Norway AIIB signatory
Poland AIIB signatory
Portugal AIIB signatory
Romania Expressed interest in deepening cooperation with
China under BRI
Russia AIIB signatory
Spain Deepening bilateral cooperation with China under BRI
Sweden AIIB signatory
Switzerland AIIB signatory
Turkey AIIB signatory
United Kingdom AIIB signatory
Sub- Saharan Burundi Transport infrastructure cooperation
Africa Comoros Expressed interest in deepening cooperation with
China under BRI

12
 Ethiopia Deepening bilateral cooperation with China under BRI
Guinea Transport infrastructure cooperation
Kenya Transport infrastructure cooperation
Madagascar Expressed interest in deepening cooperation with
China under BRI
Mauritania Deepening bilateral cooperation with China under BRI
Mauritius Deepening bilateral cooperation with China under BRI
Mozambique Transport infrastructure cooperation
Rwanda Transport infrastructure cooperation
Seychelles Deepening bilateral cooperation with China under BRI
Somalia Expressed interest in deepening cooperation with
China under BRI
South Africa Deepening bilateral cooperation with China under BRI
South Sudan Transport infrastructure cooperation
Sudan Expressed interest in deepening cooperation with
China under BRI
Tanzania Transport infrastructure cooperation
Uganda Transport infrastructure cooperation
Zambia Deepening bilateral cooperation with China under BRI
Zimbabwe Infrastructure cooperation
Oceania Australia AIIB signatory
Fiji Expressed interest in deepening cooperation with
China under BRI
New Zealand AIIB signatory
Samoa Expressed interest in deepening cooperation with
China under BRI
Tonga Expressed interest in deepening cooperation with
China under BRI
North America Canada Expressed interest in deepening cooperation with
China under BRI
Latin America Argentina Expressed interest in deepening cooperation with
China under BRI
Brazil Deepening bilateral cooperation with China under BRI
Bolivia Expressed interest in deepening cooperation with
China under BRI
Chile Expressed interest in deepening cooperation with
China under BRI
Peru Expressed interest in deepening cooperation with
China under BRI
Venezuela Expressed interest in deepening cooperation with
China under BRI
Source: Various sources from news and official websites, mostly compiled by the Fung business Intelligence Centre.

13
 Opportunities the Belt and Road Initiative can offer Foreign Investors

By building greater connectivity and developing nations, once completed, the initiative will
make it easier for large multinationals and start-ups alike to reach new large consumer
markets. It has been estimated that the growing middle class in Asia could number 4 billion
by 2021 and following on from this (according to HSBC) 66% of the world’s population could
be living in Asia by 2030. This will mean a continuously growing buyers’ market in Asia
demanding luxury goods and services. It is worth noting that the initiative will reportedly be
open to all nations and not limited by geography. Thus, the benefits of easy access to a
growing market will be accessible to all investors regardless of their geographic background.
Consequently, through the initiative this immense market will be accessible for all.

The Belt and Road Initiative could be a good investment for private investors due to
President Trump’s move to back out of the Trans-Pacific Partnership (TPP). The action
means the Belt and Road Initiative is likely to gain more popularity and momentum as it is
aimed at providing a vast network for international trade similar to the TPP. As the US are
starting to become more introverted there is gap being left on the world’s economic stage
which will likely be filled by China. This view is supported by Louis Kuijs, head of Asia
Economics at Oxford Economics in Hong Kong. By investing in the initiative’s developing
countries, investors are investing in creating more buying power and establishing efficient
routes to fully utilise these new markets.

The Chinese government are encouraging a mixture of foreign investment and domestic
investment in Belt and Road projects. Various banks and funds such as The New
Development or ‘BRICS’ Bank and The Asian Infrastructure Investment Bank (AIIB) are
providing loans for such projects. In 2016 AIIB committed $1.73 billion USD to nine
development projects along the Belt and Road. According to the Articles of Agreement of
the Bank they will “provide or facilitate financing to any member, or any agency,
instrumentality or political subdivision thereof, or any entity or enterprise operating in the
territory of a member, as well as to international or regional agencies or entities concerned
with economic development of the Asia region”. AIIB has three main requirements for
financing projects: sustainable in operation, environmentally friendly and widely accepted
by public society. According to a China-Britain Business Council (CBBC) report, “immediate
key sectors are infrastructure, maritime and logistics, banking and financial services,
professional services and energy. Further opportunities also exist in the agriculture, fishing,
food processing, light equipment manufacturing, education, tourism and consumer sectors.”

For further detail about acquiring loans from AIIB see:

 https://www.aiib.org/en/about-aiib/who-we-are/financing-operations/index.html
 https://www.aiib.org/en/projects/process/index.html
 https://www.aiib.org/en/opportunities/business/index.html?business=investment
 https://www.aiib.org/en/opportunities/business/investment-
procurement/index.html

Currently there are many large corporations who are in cooperation with Chinese banks and
companies in countries along the Belt and Road for example BP and CNPC who in 2015 saw
the highest record of oil production in Iraq since 1990. Chinese enterprises such as Changan,

14
China Mobile and BCEGI Construction and foreign owned enterprises such as Pinsent
Masons and NVC lighting are finding many opportunities for their service and expertise
along the Belt and Road in aiding the development of the initiative.

Key Investment opportunities

Banking and Financial services

Firstly, with the implementation of BRI there will be a large demand for expertise in complex
financial tools, the participation of financial institutions in BRI will mean long-term access to
capital and a more liquid and diverse market. Thus, companies investing in BRI will need
both traditional services e.g loans and settlements but also complex financial tools e.g
investment banking, third party agency facilities, risk control and financial management.
Furthermore, BRI will push RMB to expand thus creating the need for overseas financial
centres. Environmental sustainability is very important for BRI and much of it needs to come
from private investors. This creates opportunities for financial intermediaries to support
financial institutions and governments in identifying, monitoring, supervising and evaluating
green projects as information disclosure and risk control become more in demand.

Many banks such as the Bank of China (BOC) and China Construction Bank are issuing
billions of dollars’ worth in BRI bonds. The bond market e.g Panda and Dim Sum Bonds,
offers early access for foreign and private capital. Growth in BRI bond markets is likely to
attract new bond issuers beyond Chinese banks thus creating greater opportunities for
foreign enterprises. With the initiative, there is an increasing demand for commodities
trading. This is evident by BOC launching 2 offshore global commodity business centres in
Singapore and providing £40 billion in financial services to support Chinese and Singaporean
companies who want to invest in BRI. For other foreign investors, opportunities lie in
providing input for the fostering of secure, efficient and robust commodity trading and RMB
commodity financial innovation.

The immense size of BRI and the nature of there being much risk in investing in the initiative
means there are many opportunities in this field risk management and insurers. Insurers can
develop novel insurance products and services to aid companies investing in BRI. In addition,
there are more opportunities for asset managers to act as collective financing mechanisms
who can provide smaller or private investors access to large infrastructure projects. This is
promising as much of the funding for the initiative is expected to be from private investors.

Legal services
BRI investments require legal advice and services due to the complexities that emerge with
operating in many of the BRI countries. Many countries along the Belt and Road have
different policies and practices and so need specialised help to find a common
understanding and follow the legal requirements. For example, Clifford Chance advised the
Industrial and Commercial Bank of China, Bank of China, China Construction Bank
Corporation and Export-Import Bank of China on £1.2 billion financing oil project in Jordan
and Linklaters advised China Development Bank Corporation on the largest Chinese-led
power project in Indonesia. In addition, many BRI countries are developing and thus have
basic tax, accounting and audit regimes. However, investors must have an understanding of
the differences. This provides the opportunity for foreign enterprises to aid Chinese
15
enterprises in understanding local regulations and practices and assist them in following
local tax and auditing laws. There are many opportunities for foreign enterprises in
assessing investment environments and conducting feasibility studies as BRI requires
strategic advice and practical business solutions. Examples of foreign companies who
provided advice to Chinese parties includes JLT and PWC. China’s role in the shipping
industry has grown and with it there are a multitude of legal requirements to be satisfied. A
good opportunity for British investors lies in advising maritime services as English law is
used in international maritime issues and processes. The size of this opportunity is immense
given that China is currently producing 90% of the worlds standard dry cargo. BMT group
and Pinsent Masons have already become involved in this prospect.

Infrastructure planning and development

Given the scale and nature of the initiative there are innumerable joint opportunities for
international specialised companies and Chinese companies to build railways along the Belt
and Road. Furthermore, there are numerous amounts of power generation and industrial
development projects in BRI. Oil and gas pipelines as well as electricity
transmission/distribution networks need to be sustainable and efficient and so need
international specialists to aid these projects. In addition, water and waste management
projects need specialists in city layouts, supporting regulatory frameworks, co-developing
and operating the infrastructure. More infrastructure projects along the Belt and Road
means increased supply chain manufacturing facilities and research centres in 3rd countries
which provides many prospects for Sino-Foreign Joint Ventures. The development of the
corridors increases the movement of goods, commodities and people thus requiring
efficient logistics centres to cope with these ‘macro-flows’, DP world is an example of a
company already invested in this project. In all the vast urbanisation projects across the Belt
and Road there emerge many opportunities such as investing in education within these new
cities.

Energy
Over half of the infrastructure funds along Belt and Road will go towards electricity supply
thus meaning there are many opportunities in this sector. Areas in the ASEAN region have
much gas and oil. There is thus, a demand for international expertise on marine
environments, resource exploration, developments and optimal exploitation. The Keller
Group are already involved in this opportunity. Similarly, coal/nuclear power generation
requires legal, technical and operational/management support. Renewable energy projects
are becoming more price competitive thus creating opportunities for smaller solar and wind
power plants. In 2017 China announced a nationwide carbon trading market however, they
need expertise on trading markets, carbon credit obligations schemes, regulatory
frameworks and professional services that support planning and development. KPMG have
already aided China in this area.

16
 How the Belt and Road Initiative Will Impact China’s Economy

There have been many queries over how the ‘Belt and Road’ initiative will achieve
actualisation due to its immense cost requirement and subsequent infrastructure financing
‘gap’. The issue is a result of China providing the majority of the funds. This is demonstrated
by a 2015 case study where Beijing’s Import and Export Bank of China lent $80 billion USD
to the initiative compared to the Asian Development Bank which lent $27 billion USD. Given
that the Asian Development Bank estimate the initiative will cost over $22.6 trillion USD by
2030 it brings into question how China will be able to continue burdening this weight of
carrying the initiative.

The answer lies in China’s financing resources such as: The Silk Road Fund, the 10 major
cooperation projects announced at the Forum on China-Africa Cooperation, the AIIB, The
New Development Bank and loans from Chinese policy banks. In addition, the Belt and Road
Initiative will eventually start paying for itself or at least providing significant returns; as of
March 2017, Chinese companies have made over $50 billion USD from investments related
to the initiative and many projects have already been launched in countries connected
through the initiative. Within the first eight months of 2016, China’s trade with BRI
countries exceeded $600 billion USD. Estimates suggest that the initiative will make China’s
annual trade along the Belt and Road over $2.5 trillion USD. Aside from monetary returns,
the initiative provides an outlet for China’s immense industrial capacity. It creates and
protects jobs in the industrial field as well as helping to maintain economic growth.
Furthermore, the connections to Russian and Iranian oil and gas will protect China’s energy
needs whilst pipelines on the coast of countries such as Myanmar and Pakistan enables
more diverse maritime routes and thus a greater outlet for Chinese goods. Exports to BRI
countries have grown faster than total exports since 2013 demonstrating the potential of
the Belt and Road initiative for China’s growing economy.

Potential Expansion of Renminbi

Firstly, it is worth noting that at this current moment the US dollar is still the most popular
choice of currency for settlements along the Belt and Road. Whilst it is not a specific aim of
The Belt and Road Initiative the initiative provides three possible routes through which
Renminbi could be internationalized. (I) BRI could promote RMB settlement through the
current account. Currently China is aiming for their trade with BRI countries to reach around
$2.5 trillion USD per year within the next 10 years. Given that China is promoting the use of
RMB on the Belt and Road this would mean an immense amount of RMB exchanging hands
internationally. In addition, greater export of goods and services along the Belt and Road
will mean an increased demand for RMB trade settlement and currency mobility. For
example, in 2015 Chinese companies signed 3,987 construction contracts in BRI countries
this is 44.1% of the value of Chinese overseas construction projects. (II) The Initiative could
improve RMB outflows through the capital account. Between January 2012 and September
2015, the number of China’s Outward Direct Investments (ODI) settled in RMB increased
from 0.2 billion RMB to 20.8 billion RMB. The Belt and Road Initiative means more markets.
For example; In 2015 China’s Outward Direct Investments (ODI) involved 49 BRI countries
with investments connected to BRI reaching USD $14.8 billion (18.2% higher than 2014).
ODI’s in BRI countries will increase with its development and thus RMB outflow will rise

17
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