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China: The Infrastructure Megaproject

2017/10/03

The Infrastructure Megaproject

To help simplify and increase cross-border trade, the top priority of BRI is infrastructure development

While infrastructure development is focused on transportation, particularly railways inclunding highways and ports, it as well includes the telecommunications and energy sectors

BRI projects will benefit infrastructure development specialists in China and around the world, create jobs for local people along the Belt and Road and help world distributors of a wide variety of goods reach new and existing markets faster

Improving efficiency and productivity, particularly in trade flows, is essential for sustaining the increase a lot of Asian economies have seen in the completed decade. Investing in infrastructure – ports, roads, railways and airports inclunding power plants and telecommunications – throughout the region is the best way to make that happen. It’s just this infrastructure investment that the Belt and Road Initiative (BRI) is all about.


With a goal of simplifying and increasing cross-border trade across Asia and beyond, China has by presently made significant investments to build new or upgrade existing infrastructure to meet international standards to support BRI. By the end of August 2016, Chinese companies had signed nearly 4,000 engineering contracts along key trade routes with a combined price of nearly US$70 billion. As of September 2016, some 170 projects across 14 sites in Asia Pacific with US$206 billion investment cost were either in planning stages or in evolution.


For BRI to realise its development potential and to address climate change-related challenges, about US$1.7 trillion is needed annually. Reaching these levels will require outside investment . Historically with Chinese overseas investment , however, Chinese companies partnered with other Chinese entities. BRI is laying the groundwork for companies to partner with both Chinese and non-Chinese local enterprises – creating opportunities for organisations around the world to invest in the region’s increase.


While the headlines around BRI focus on large investment flows, there are downstream opportunities for a wide variety of industries. At the outset, those most likely to profit will be infrastructure providers who can play a role in building cross-border railways, highways, ports and airports inclunding oil pipelines, electricity grids and telecommunications networks. Longer-term this will extend beyond engineering, architectural and construction firms to include real estate, logistics, financial services, advisory and additional.

Along the Belt & Road

According to Anderson Chow, Chief of Industrials and Infrastructure, Asia-Pacific at HSBC, the rate of new investment in China’s roads and high-speed railways has started to slow next years of increase. As a result, the country’s major construction companies and train manufacturers are looking overseas for new request – inclunding along the Belt and Road. As pollution has become a political factor in China, China has become a leader in carbon reduction technology and will as well be looking to export their knowledge along the Belt and Road.


There are opportunities for non-Chinese firms as well. Major world manufacturers of heavy business machinery will be needed to provide excavators and other equipment necessary for these types of projects. And although a lot of of the infrastructure projects will involve large industry players, Mr Chow believes there will be a significant local impact in cities and towns along the Belt and Road. “China’s railway firms may provide a few hundred project engineers for a new railroad, but the 30,000 workers who do the manual work will be hired locally – and that means the local economy will get a boost.”


With its focus on improving connectivity, BRI will have a positive result on sustainability. A better investment in developing additional efficient railway infrastructure to support the supply chain and enhance productivity, for instance, will move materials, goods and people from road to rail – potentially cutting down on vehicle emissions.

 

Beyond the Belt & Road

BRI and the new railways will as well have an impact on economies thousands of miles away from the Belt and Road trade routes. For instance, sheep farmers in New Zealand can use the new infrastructure to get their meat to Europe faster. Slow steaming to European markets can take as much as 70 days, which means lamb only has a couple of weeks of shelf life once it arrives. By shipping meat to China by sea and again to Europe via rail across Eurasia the product gets to its destination up to two weeks faster, potentially helping farmers get a better price from retailers.

 

Growing Middle Classes

In opening markets up, BRI is expected to accelerate social and economic increase. That means in addition to facilitating trade and capital flows, infrastructure improvements are as well necessary to promote urban expansion. As people move into the middle classes, there will be an increased expectation around quality of life – inclunding efficient transportation systems for their daily commutes and holidays and cost effective energy.

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