The Belt and Road creates opportunities

The successful conclusion of the Belt and Road Forum for International Cooperation in Beijing in the middle of this month signals the commencement of a new phase in the implementation of this ambitious project. Because of its magnitude, its launch by President Xi Jinping in late 2013 was greeted with certain amount of doubt and skepticism about its sustainability in some quarters.

Three and half years later, the large numbers of heads of state, government leaders and heads of international organizations who flocked to Beijing to attend the forum testified to the broad appeal of the initiative to the international community. Foreign media and think tanks around the world are buzzing with analyses of the statements made and agreements reached at the forum, and evaluations of the achievements. The Belt and Road Initiative has no doubt captured the center stage of global attention. The reasons are not hard to understand.

For China, the Belt and Road Initiative is a natural extension of the drive to develop the northwestern part of the country, which commenced at the turn of the century. After three decades of high-speed growth spearheaded by the special economic zones in the south and the coastal provinces and cities, it is only natural for China to strive to close the wide economic gap between the prosperous coastal regions and the much poorer northwestern interior. As the nation gathers strength in its infrastructure development capacity and faces an increasing need to relocate its industries owing to rising costs, environmental degradation and natural resource depletion, it has reached a stage where linking China with Europe via Asia and Africa make eminent economic sense. Over time, the stimulus to the development of neighboring economies would spur growth, which would in turn help propel China’s economy forward.

China’s outward drive at this point in time is particularly important and welcome by neighboring developing economies because global growth is losing speed and balance. As Brexit and the rise of protectionism and anti-immigration, nationalist politicians in the West demonstrate, after several decades of trade and investment liberalization under the aegis of the World Trade Organization, globalization has peaked and is facing a backlash of protectionism. Free trade has been blamed for engendering the wide income inequality and the stagnation of middle-class incomes in the West. As the United States scuttled the Trans-Pacific Partnership, the free trade drive of former president Barak Obama, developing countries are relieved and gratified that China is taking the lead in furthering trade and investment liberalization. Whereas the globalization drive in the post-war years has been from “the West to the rest”, in the words of the late Samuel Huntington, this time, the globalization drive radiates from Asia – from China to the West.

For developing countries, whether in Southeast or Central Asia or Africa, China’s financial support for infrastructural development cannot be timelier. It is hard for impoverished regions to grow without power supply, roads, railroads, energy infrastructure and information backbones. The funding provided by the Asian Infrastructure Investment Bank and the Silk Road Fund provides the welcome wherewithal to jump start construction of these essential facilities.

For developed countries in the West experiencing anemic growth, the likely jump in aggregate demand from developing countries for raw materials, commodities and in due course finished products cannot but spell good news for firms languishing for want of business. The gigantic Keynesian stimulus provided by China’s Belt and Road cannot occur at a more opportune time, when the world faces the specter of slow growth caused by credit crunch and protectionism.

For the financial community, even with China’s largess, the funding gap for financing the massive infrastructural needs of the developing world is so great that no single state can bankroll the enterprise. Other wealthier nations need to jump in; and myriad financial institutions need to join forces with state banks to keep the development going.

In due course, the infrastructure-led development will spawn demand for services – from security and protection to legal, professional and business services – creating opportunities for diverse professions and enterprises to partake of the growth.

Hong Kong is well positioned to contribute to the financing of this massive developmental project. As a well-established international financial center with strong rule of law and advanced professional and business services, it is well qualified to provide a platform for developing multiple channels for funding. Its financial community will benefit from the further internationalization of the yuan and all the associated yuan and treasury business. The enhanced links to Muslim countries along the Belt and Road would enable Hong Kong to expand its Islamic finance business, apart from developing new financial products to meet the financing needs.

Strategically located along China’s historic Maritime Silk Road, Hong Kong is well positioned to benefit from increases in trade and investment with Association of Southeast Asian Nations (ASEAN) countries. Hong Kong is also well positioned to be an important hub in the information superhighway linking Belt and Road countries. China has already established good information and communication links with ASEAN nations through the China-ASEAN information harbor in Guangxi. With excellent data center facilities in Hong Kong, Hong Kong should strive to be a key part of the information ecosystem of the Belt and Road, leveraging the expanding networks to upgrade its use of the internet, and take its cross-border trade, logistics, tourism and finance to new levels.

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