Belt & Road News Digest : January 2016

Belt & Road News Digest : January 2016

Categories: News

Hong Kong

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Hong Kong | 13th January, 2016
Spotlight on Belt and Road in Policy Address

In the recently published policy address, Chief Executive CY Leung has taken a substantial part to cover about the Belt and Road and Hong Kong’s future development in it.

Apart from ideas that were mentioned several times previously by the government (such as fund raising platform and Islamic financial products), actual measures include tax concessions to attract mainland enterprises and MNCs to set up corporate treasury centres in Hong Kong, establish a steering committee and office for the Belt and Road, and scope of the Targeted Scholarship Scheme will be expanded to attract students from the Belt and Road region to study in Hong Kong.

Image Source: Investopedia

Hong Kong | 21st Jan, 2016

Belt and Road: Mainland Short to Mid Term Investments Expected to Reach $240 Billion

At the Asian Financial Forum, HSBC’s Head of Asia Pacific Global Banking and Markets Gordon French estimated the mid to short term investment by mainland China to develop the Belt and Road to amount at USD$240 Billion.

French also mentioned the importance of capital market at the Belt and Road, and that Hong Kong can help support the Belt and Road asset management and financing activities through providing its talents and skills.

Middle East

Image Source: SCMP

Saudi Arabia, Egypt and Iran | 25th January, 2016

China and Middle East Countries Announced Joint Efforts for Belt and Road

China president Xi JinPing has just finished his state visit to Saudi Arabia, Egypt and Iran.

During the state visit, Xi also announced that China will build comprehensive strategic partnership with the three states respectively. China has also signed numbers of MOUs with these three countries RESPECTIVELY, where it will embark bilateral trade and development that covers energy, free trade zone, investment, finance, etc.

Much attention has been drawn to the state visit to Iran. As years-long sanctions against the country have finally been lifted at the beginning of the year, it was also the 1st time in 14 years that Chinese president visited the country. This also marked the very first state visit Iran received after the sanctions were over.

What We Think:

Having a blank period since 2009, it was until this year that China performed a state-level visit in the Middle East region.
The timing of the visit also had made many broken out in a cold sweat.

Relationship between Saudi Arabia and Iran has never been warm, and the two countries have recently broken off diplomatic relations at the beginning of the month. As the world wonders if the state visit might hit the nerve of any party, Xi managed to complete his journey as planned without turning a hair, bringing home a bunch of harvest.

On China’s side, Middle East will only be of growing importance in the future.

China has become a net oil importer, and Saudi Arabia tops other Middle East countries as the biggest oil supplier to the Middle Country (Iran also supplies a substantial amount).

Even as China’s economy slows down, the demand for energy will continue to rise nonetheless. And in the course of the Belt and Road, as an area that guarantees source for China’s energy, Middle East is also a crucial region.

Since modern times, Middle East has involuntarily reached headlines all over the world due to various issues. China’s policy towards the Middle East has remained “business is business”, and had not openly interfered with other matters in the area. Xi’s state visit this time again exemplified China’s ways of doing things.

The “business only” policy seems to support China’s diplomatic relationships and the country’s own development, with some hidden concerns. As China increases its investment in specific areas, accompanied by the rise in number of Chinese citizens residing in the Middle East region, at the same time it also leads to more restraints: for example, region safety putting Chinese citizen’s safety and company assets at risk, or having to compromise with local governments in order to protect investment there.

Though China has offered loans to many countries, if diplomatic relationships remain plainly on the business ground, other countries can then be able to take “commercial considerations” as an excuse, choosing “business proposals” offered by other countries that can deliver better price efficiency, quality of products etc.

Management and quality control of SOEs are also motley. An example would be a made-in-China train ordered by Australia was found to contain carcinogenic substances that were prohibited by the contract, causing problems between the two countries, also bringing bad image to Chinese made products on an international level. This was not any individual case.

The “business is business” approach may seem smooth on the surface, but eventually there are also possibilities of running aground. Careful steps must be taken.