From Belt and Road to Greater Bay

The Belt and Road Initiative is heralding a slowdown in investment. This is due to the economic and technological war between China and the USA, which will continue for years, probably even decades, and will continue to drive the decoupling of the two largest economies in the world – regardless of the Trump administration, because the American Democrats will also try to slow down China’s further rise with economic and technological means.

As a result, money is becoming increasingly scarce in China, and the population’s call for a shift in BRI budgets away from projects abroad towards domestic investment is growing louder. Beijing is also under pressure from within.

Foreign investors are becoming increasingly sceptical about the return on investment of their BRI commitments against the backdrop of increasing geopolitical, credit and currency risks. The counter-reaction is in full swing and the negotiating power of foreign investors and consortium partners is increasing.

The Chinese government is reacting by making more concessions to its foreign project partners. Beijing, for example, has cut the costs of the Malaysian East Coast Rail Link by around a third. The state government is making BRI projects more transparent through digital procurement, improving project quality and demanding compliance. They focus on innovation and emphasize the digital Silk Road and Greentech. The Belt and Road Initiative is no longer about steel, cement and bulldozers, but about technical standards, law and intellectual property.

China is also much more critical of individual BRI projects. Quite a few are being revised, shortened or cancelled altogether. This increases the risk of foreign partners being dropped. There will also be a shift of Chinese funds from the Belt and Road Initiative to the Greater Bay Area (GBA), the new Chinese Silicon Valley. Here the Chinese are in control, and here they hold the reins.

For foreign investors and partners, it is now important to analyze and evaluate the projects more closely so that they can pick the raisins. For this they need a solid investment calculation, short-term scenario analyses and comprehensive risk assessments.

Dr. Hans Joachim Fuchs

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