Belt and Road

All eyes have been on Asia for several reasons, including President Trump’s recent visit to the region. Last week we heard reports on the United States and Japan offering an alternative to China’s Belt and Road Initiative (BRI) for the many Asian and African countries seeking to build up their infrastructure. The BRI is an initiative worth paying attention to given that, if achieved, it would be the world’s largest platform for regional collaboration. The BRI aims to connect more than 60 countries with physical and digital infrastructure across Asia, Europe, and Africa. To give a sense of scale, McKinsey reports that if completed, the BRI would cover “about 65 percent of the world’s population, about one-third of the world’s GDP, and about a quarter of all the goods and services the world moves.”

Hesitancy and speculation surround China’s ability to fund and execute against such a grand vision. Despite China’s progress in raising the capital needed to fund investments, many are highlighting the significant risk associated with the BRI, partially due to the inherent uncertainty of the many emerging-market countries involved. But China has already been making moves into these markets. According to the U.S. Global Leadership Coalition, Chinese development assistance in Africa has increased by 780% since 2003. Chinese state-owned companies are acquiring vast infrastructure components, including ports and rail lines, and building new financial centers and special economic zones. In Addis Ababa, the new Chinese-funded light rail system began service last year at a cost of a half a billion dollars. China positions its investments as boosting African economies thereby creating positive social impact, but it’s also strategically furthering its reach beyond that of any other country.

What does this mean for your business? Whether the BRI comes to full fruition, it is arguably the most ambitious economic and diplomatic program in modern history. While many point toward its incomplete and risky funding situation and the inherent difficulties in large-scale execution of such a plan, the reality is that the groundwork is already being laid. The BRI represents a framework for partnering with China economically and politically, and businesses should understand the BRI at a deeper level as well as become further familiar with the risks associated with working in emerging markets. The BRI is already influencing the future of trade, and knowing where you stand — and where you want to position your business — is the best way to meet the future head on.

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