Special Report – Belt and Road

Chinese firms keen to make connections in digital realm

The mainland government is keen to develop soft infrastructure that will enhance communication between countries along the belt and road plan’s trade routes

PUBLISHED : Thursday, 20 September, 2018, 11:02am
UPDATED : Thursday, 20 September, 2018, 11:02am

French winemaker Dominique Piron sent 18,000 bottles of Beaujolais in 36 containers to China in 2016, two years after meeting Xi Jinping and listening to the president’s vision for China’s global trade strategy.

By the end of 2018, he hopes to send the first container of wine via new rail links that have been built as part of the infrastructure developments that connect China with the rest of the world.

Piron said that China now accounts for one-third of his annual turnover. The wine house even created a vintage with a red and gold label that was decorated with a rooster for Lunar New Year.

Wine is one of the industries expected to benefit from the projects resulting from China’s global trade strategy.

There were thousands of wine exhibitors from related countries attending the 8th China International Alcoholic Beverage Expo in Guiyang, Guizhou province earlier this month.

“The expo aims to reinforce the exchange and cooperation between specialists of [the] alcohol industry from China and abroad” says Lu Yongzheng, vice-governor of Guizhou Provincial People’s Government.

“It also provides a platform for building friendship, and finding new chances of business network for specialists of alcohol industry from over the world,” Lu says. Exhibitors and enthusiasts from 40 countries attended, including companies from the US, France, Spain, Italy, Portugal, Australia, New Zealand and South Africa.

Most of China’s investments will go to infrastructure, ports and energy projects. But the mainland government is keen to develop soft infrastructure that will enhance communication between countries along the belt and road plan’s trade routes.

This will also be a boon to Chinese tech companies.This is part of the Digital Silk Road, for which tech giants such as Alibaba (the parent company of South China Morning Post) and JD.com have pledged funding to help enhance their internet-based industries.

China aims to expand coverage of its own satellite-navigation system to the 60-plus countries along the Belt and Road trade route by 2020.

It eventually hopes to reach global coverage by using 35 satellites and end its reliance on American GPS systems.

Last week, Alibaba Group Holding formed a joint venture e-commerce company with the Russian Direct Investment Fund (RDIF), mobile operator MegaFon and internet giant Mail.ru in which Alibaba will sell 52 per cent of its Russian business to its partners and provide funding for the project.

In return, Alibaba will be given increased access to the Russian market.

“By partnering with Russia’s leading consumer internet platform, AliExpress Russia will leverage Mail. Ru Group’s 100 million internet users across its social media, messaging, email and online games properties.

“With access to this unique platform and user base, the joint venture will fill a highly complementary role in the Russian consumer lifestyle value chain, creating a one-stop platform for social, communications, gaming and shopping,” a statement from the Group said.

While the approach is expected to provide business opportunities for domestic companies along the route, Chinese firms are clearly the biggest beneficiaries.

In 2015, China Development Bank and Industrial and Commercial Bank of China issued a US$2.5 billion credit line to India’s largest telecom operator, Bharti Airtel, to help it expand domestic infrastructure projects. Bharti Airtel then promptly outsourced some of its network equipment to Chinese tech giants Huawei and ZTE.

Domestic companies will also benefit from China investment, though to a lesser extent. Indonesia-based Mainspring Technology, run by Malaysian Chinese Liew Weihan, is making the most of China funding to develop its own mobile internet sector.

In response to the trade initiative, technology and funds from China will help Southeast Asia develop its own mobile internet sector.

Liew predicted that “the next decade will be a golden era for the internet in the region, most notably Indonesia, Malaysia, Vietnam and the Philippines”.

Mainspring received tens of millions of dollars from a China-based venture capital fund.

“We are a direct beneficiary of the initiative. Our technology, capital and experience are all from China,” Liew said. “The initiative will propel the growth of the entire internet sector across Southeast Asia.”