I like to keep company with savvy international people with expertise that complements mine. My longtime friend, David Baxter, is one of those people. He is a South African who now lives in the Washington, D.C. area but routinely travels all over the world to advise governments and companies as an international development consultant. I call him “Mr. PPP” (Public Private Partnerships) because one glance at his LinkedIn profile makes that clear. As Mr. PPP, David specializes in public development projects in Africa, the Middle East, Asia, and everywhere else, which gives him insight into how governments are fostering international business, which governments are serious about international development, and which ones are smart about it. When speaking with David recently, we concocted a series of blog posts about the impact of China’s Belt and Road Initiative from David’s boots-on-the-ground perspective.
Many of these BRI countries will need increased economic activities to pay back their Chinese debt and will welcome U.S. and foreign companies that want to use their new infrastructure in both import and export ventures.
The goal of this and the future connected blog posts is to help U.S. and international companies understand what China is doing in target international markets so that they can benefit from utilizing Chinese-funded or Chinese-built infrastructure. As David put it, “Increased traffic using those facilities is in the national government’s interest, and those facilities are ready doors to enter into many regions. Why aren’t companies looking at opportunities where they’re using Chinese infrastructure in these foreign markets?”
Since 2013, China has been busy making friends through its Belt and Road Initiative (“BRI”). China aims to encircle countries in the historical overland Silk Road and new maritime Silk Road in interconnected infrastructure to bring them closer into China’s realm of influence and provide a host of mutual benefits to China and the involved countries. China provides long-term, low-interest loans to governments and often provides the lowest priced skilled labor required for those projects.
As of May 2019, over 60 countries have agreed to or expressed interest in BRI projects, and those countries encompass about 2/3 of the world’s population, representing both potential markets for Chinese goods and potential labor pools for lower-cost labor. They represent a large portion of the world’s natural resources, which can provide raw materials to feed China’s manufacturing complex. These countries include Pakistan, India, Sri Lanka, Malaysia, Philippines, Thailand, Cambodia, Vietnam, Myanmar, Laos, New Zealand, Iran, United Arab Emirates, Saudi Arabia, Qatar, Turkey, Egypt, Ethiopia, South Africa, Russia, Poland, Ukraine, and many more (see CFR’s Belt and Road Tracker for the full map, and CSIS’ interactive map is also excellent). These countries include many of the global energy producers (Middle East and Russia) and energy consumers (developing nations). Because China is an export-focused economy, it cannot let up its current pace of development. It needs to keep its SOEs and workers busy, either on domestic or international projects, or both.
But like all friendships that come with strings attached, many countries have started to feel uneasy about chummying up too close with their lender. In China’s BRI, in which China shows up with a checkbook, an open handshake, and a Xi Jinping-worthy smile (especially when that relationship sometimes mandates Chinese firms be included in the bidding process) those strings can feel more like chains. Debt trap diplomacy is a term that has been used to describe China’s BRI projects because China has been willing to extend loans on outwardly favorable terms with plenty of recourse for China if the borrowing nation defaults.
Due in part to this type of heavy-handed diplomacy, U.S. and foreign companies have opportunities to make inroads into these countries and markets. The Chinese are building ports, roads, rails, and power plants, along with cables and pipelines, but they do not control who uses the infrastructure. And because China’s BRI investments often bring additional cultural and political baggage, some target countries are loathe to fully engage with China. China’s “big brother” oversight through both technology and individuals on the ground and Chinese information (and disinformation) networks disguised as cultural enrichment programs, together with the prospect of Chinese colonization by leaving its workers in-country are just some of the concerns of BRI partner countries. Many of these BRI countries will need increased economic activities to pay back their Chinese debt and will welcome U.S. and foreign companies that want to use their new infrastructure in both import and export ventures. Those countries with ports, energy infrastructure, and a willing (trained or trainable) labor force will be most attractive to companies in maritime countries like the U.S. who know that maritime transport is a fraction of the cost of overland transport.
In sum, China is looking at the long game, and so should your company. (For instance, China’s state-owned Chinese Overseas Ports Holding Company has a long-term lease on Pakistan’s Gwadar Port through 2059, but in Chinese consciousness, anything less than 1,000 years is shot-term planning.) If your company does not have a 40- or 50-year plan, it should start to think in those terms. China’s long-term BRI infrastructure development is a boon to companies who are looking to engage with new international markets for raw materials, a deeper labor pool, and potential consumers. In our future posts, we’ll do our best to help you recognize and utilize the most promising BRI markets, including identifying potential legal issues.
https://obortunity.org/wp-content/uploads/2019/07/GettyImages-492870988.jpg10411600Obortunity Infohttps://obortunity.org/wp-content/uploads/2017/09/ObortunityLogo-e1508394799669.pngObortunity Info2019-09-11 09:28:352019-09-11 09:28:35How Your Company Can Benefit from China’s Belt and Road Initiative