China Conference

‘One Belt, One Road’ infrastructure seen as catalyst for new trade growth

PUBLISHED : Friday, 02 December, 2016, 2:47pm
UPDATED : Friday, 02 December, 2016, 3:04pm

Private equity investors are keen on projects in many of the 60 countries along the “One Belt, One Road” route as they believe the infrastructure built up over future years will create a huge network that will promote trade, manufacturing, services and e-commerce in the countries, according a panel of speakers on Friday.

Speaking at the South China Morning Post’s annual China Conference, Fred Hu, founder and partner of Primavera Capital Group, said trade, manufacturing and consumer services would develop in the 60 belt and road countries after the many infrastructure projects were built.

Beijing launched the initiative in 2013 with the goal of building railways, roads, airports and ports to link up 60 countries including China and India, and other Asian, Middle East and European countries.

“These infrastructure [projects] will create a giant network to promote trade flow among these countries. After the airports and ports are built, manufacturers will come to these markets. Then consumers and other services sectors will follow,” Hu said.

However, Hu added that the one belt, one road initiative wasn’t just about infrastructure. “It will provide a lot of investment opportunities in companies conducting trade, manufacturing and consumer businesses,” he said.

These infrastructure [projects] will create a giant network to promote trade flow among these countries
Fred Hu, Primavera Capital Group

Another panel speaker, Frank Tang, chief executive officer and managing partner of FountainVest Partners, said the next 20 years would see a lot of manufacturing migration between the many belt and road countries from China to Europe.

“After establishing a gigantic network of railways and ports among these 60 countries that represent 70 per cent of GDP worldwide and 75 per cent of resources globally, a lot of manufacturers will set up in these countries as they would benefit from the transportation network,” Tang said.

Paul Yang, chief executive officer of China Development Financial and chairman of CDIB Capital International, said the new transportation networks will led to more migration of manufacturers among these countries.

Yang believes China’s manufacturing industry will shift to more high end technologies, while some factories would move to low cost centres such as India, Bangladesh and Vietnam to lower production costs.

Panel moderator Joe Tsai, chairman of South China Morning Post Publishers, brought up the challenges of US President-elect Donald Trump’s trade policies towards the belt and road projects. For example, Trump has called for Apple to move its iPhone manufacturing back to the US from China.

However, Hu played down the concerns as he believes the US would support global trade.

“The one belt, one road project would promote global trade and when trade substantially increases, it will create more jobs. Both the US and China and other countries would benefit,” he said.

Hu said the belt and road initiative is also going to promote e-commerce because many countries on the route don’t have good banking and retail networks.

“The internet and mobile access would change how companies conduct their businesses. Private equity investors have a huge appetite to invest in the e-commerce sector,” Hu said.

Tang said Hong Kong based companies could also benefit from the belt and road project.

“The business sector in Hong Kong could play an important role in the one belt, one road project. They would just need to adjust their business model to provide services for the companies involved in the project, or to the Chinese companies that plan to invest overseas. Hong Kong remains a good stepping stone for Chinese investing in the overseas market,” Tang said.