India and Russia tipped to be the big winners from China’s massive ‘Belt and Road' investment
Less-developed countries along the new Silk Road stand be among the big winners of investment as China revives ancient land and maritime trade routes, according to estimates by a top bank.
Credit Suisse forecasts that China’s massive inflow of investment over the next five years as part of Beijing’s “Belt and Road Initiative” could amount to as much as US$502 billion, or equivalent to 4 per cent of the total gross domestic product of the 62 countries along the routes in 2015.
The biggest recipients of the investment dollars were expected to be India, Russia, Indonesia, Iran and Egypt, the bank said in a report released earlier this month.
The initiative, unveiled in September 2013 by President Xi Jinping, aims to connect China by a network of overland corridors and sea routes to the rest of Asia, Africa and beyond, linking the dozens of countries through infrastructure and financial and trade ties.
The economies along the routes account for about 63 per cent of the world’s population and 29 per cent of global GDP.
Credit Suisse estimates that China’s overseas investment in the initiative over the next five years will range between US$313 billion to US$502 billion, depending on how much investment the countries need and how much China is willing to put in.
India stands to be the biggest gainer overall, according to the report, with China putting in between US$84 billion and US$126 billion. Russia is next with US$53 billion to US$80 billion; Indonesia third on US$35 billion-US$52 billion; Iran fourth attracting US$17 billion-US$26 billion; and Egypt fifth with US$13 billion to US$20 billion.
The report also says China could invest between US$52 billion and US$79 billion in 13 African countries. “Africa is rich in resources, and an important destination for Chinese investment over the past decade,” it said.
According to an HSBC estimate, the “Belt and Road Initiative” will generate roughly 300 billion yuan to 500 billion yuan in railway investment, financing more than 15,000km in high-speed rail links along the route.
The Credit Suisse report said the initiative could become even more promising as a more “isolationist” administration in the United States created windows of opportunity. “With the new US administration pulling out of the Trans-Pacific Partnership, it is unavoidably sending a message to the world that US government policy is turning more ‘isolationist’,” the report said. At the same, China was striving for greater global influence, it said.
Chinese investment could also help make up for any capital outflows in the region, the report said.
“If the dollar strengthens, especially as the US moves along the path of rate normalisation, emerging market countries also have to face the risks of capital outflow,” it said.
Eric lp, group managing director of Hutchison Ports, said regional economic growth was gaining traction, as opposed to global growth under the new US new administration.
For instance, exports to China from countries in the Association of Southeast Asian Nations recovered faster and better in recent months than those of other trading partners. In March 2017, the growth of Asean’s exports to China was higher than those to the European Union, the US, Japan and South Korea.
But Credit Suisse also said China’s actual investment in the belt and road countries might fall short of expectations, given the drop in its foreign exchange reserves over the last few years.
China’s forex reserves stood at US$3.030 trillion in April, well below the peak of US$4 trillion recorded in June 2014.