OBOR News Digest: 7th August, 2015

OBOR News Digest: 7th August, 2015

Categories: News

Hong Kong

Image Source: one-space

Hong Kong, 5 August, 2015
BOC Hong Kong To Invest Hundred Billion In OBOR For The Next 3 Years

According to Lin Jingzhen, Deputy Chief Executive of BOC Hong Kong, the bank is expected to invest a hundred billion in developing the OBOR strategy.
This year, a capital worth of 20 billion will be injected into this development policy. This amount aims to construct and expand the retail network in countries along OBOR, so as to accelerate the growth of overseas business, and also to increase the profit margin of overseas business to 40%.

Mr Lin further elaborated on the business opportunities that OBOR has brought to BOC Hong Kong, such as investment opportunities in infrastructure. He said that BOC Hong Kong can be a platform for OBOR financing to conduct activities such as initial public offerings (IPO), OBOR-related bonds issuance and more.

Southeast Asia

Image Source: china.org.cn

China & Southeast Asia, 6 August, 2015
More Enterprises In Pearl River Delta To Relocate In OBOR Countries

Due to the rising costs of operation, manufacturing industry in Pearl River Delta has shrunk in recent years as companies relocate their businesses elsewhere. Many of these companies have seen business opportunities brought along with the implementation of OBOR, hence relocating in OBOR countries such as Myanmar, Vietnam and India.

A survey conducted by Dongguan Taiwan Business Association revealed that more than 30% of the Taiwan manufacturers in China will set up factories in Southeast Asia in the next 3 years. Furthermore, more Taiwan manufacturers are likely to relocate in countries such as Vietnam, Myanmar, Cambodia and Indonesia for the next 5 years.


7th Aug
Image Source: china.org.cn

Beijing, China, 6 August, 2015
CNPC and BOC Signed An “OBOR” Cooperation Agreement

Published on the China National Petroleum Corporation’s (CNPC) official webpage, CNPC has signed an agreement with Bank of China (BOC) on cooperation in aligning its strategy with OBOR.

Under the framework of the agreement, both parties will strengthen cooperation in areas such as financing, cross-border settlements, consulting, financial management, collaboration with peers, insurance, investment banking and more. Wang Yilin, Chairman of CNPC, said the increased intimacy of cooperation with BOC aims to propel nation’s OBOR strategy to be realised more quickly.

What We Think:

Many business opportunities have aroused from the implementation of OBOR. However, we should not overlook the imminent threats that accompanied. The trend of manufacturing companies in Pearl River Delta relocating overseas, as reported on 6th August, can be an indication of a bigger problem.

Although implementation of OBOR is not the cause of this trend, it is likely to speed up the rate of relocation. As OBOR strategy continues to develop, infrastructure, accessibility, technology and other various systems of the less developed countries along the routes will improve, creating a more conducive business environment. Coupled with low labour-cost, these countries have a competitive edge in manufacturing industry, attracting more labour-intensive manufacturing companies to set up operations there.

But as more manufacturers in China relocate, livelihood of locals back in China may be threatened, possibly giving rise to high structural unemployment. For most developed countries, their economies have undergone several re-structuring. Hence, many sees this as a natural phase of Chinese economy development. However, is China ready and capable to re-structure the world’s 2nd largest economy, taking up a more technology-based or knowledge-based economy? Does China have plans in place to train and move those massive numbers of unemployed into sunrise industries? If the answers to these questions are “No”, China is likely to experience a long-term high structural unemployment.