The Belt and Road Initiative (BRI) offers opportunities for UK companies to help provide finance for the Chinese Government’s infrastructure upgrade mega programme.
Giles Hutt, Professional Support Lawyer at solicitors Clyde and Co, told our London Property Club audience that questions exist over whether China has the cash to keep up momentum on the BRI, which involves infrastructure development and investments in 152 countries.
Noting that the country’s foreign exchange reserves have sunk from $4 to $3tr, leaving its current account surplus “close to zero”, he said: “If China is running short of cash, there are huge opportunities for us to co-invest.”
Hutt added that the initiative offered opportunities for “all sorts” of legal, financial and project management services, which the UK stands to benefit from. He said that besides China potentially running short of cash, other risks to the BRI include “brand dilution”.
Noting that it had even been used to brand a dating app designed to link up Chinese men and Ukrainian women, Hutt said: “It can be attached to anything so there is potential for loss of focus.”
He also said the initiative’ reputation had suffered in some of the countries where it had been rolled out, like in Montenegro where it had supported the construction of a new motorway.
The $1.3bn cost of the project had increased the Balkans state’s national debt to the tune of 15%, fuelling resentment.
And the main fruits of BRI activity in Pakistan is likely to be felt in China, he said. Pakistan will be able to more easily export its agricultural products, like milk and basic textiles, to China but they will be processed in Xinjiang province in the west of China.
“Pakistan will be able to export textiles to China, but they will be very much at the bottom of the scale,” Hutt said, adding that the BRI is partly driven by a Chinese desire to change the terms of global trade in its own favour.
Referring to the IT sector, he said: “For every computer manufacturer in China, 30% of the wholesale price has to be sent to companies in the west because they own patents for things like USB ports. If by dominating its neighbours and world markets, China can control global sales, patents can be used from China and instead we will be sending billions to China.”
Hutt said another “key objective” of the BRI is to boost the economy of China’s landlocked western provinces which have seen lower levels of growth than those on the eastern seaboard as well as higher levels of unrest.
He said: “One of the most important goals of Belt and Road is to re-balance China’s internal economy. The idea is that civic unrest will subside and imbalances within China will be evened out.”
But he said the Chinese government is committed to the BRI for at least 30 years, which will take it up to centenary of the foundation of the Chinese Communist state.