The Belt and Road Initiative (BRI) is a series of land, sea, air, and digital economic corridors better connecting the markets of Asia, Africa, and Europe for the purpose of more equitable development and mutual benefit. Central to this plan is a program to spread investment, transportation networks, infrastructure, and technology out from more developed markets, such as the east of China, Hong Kong, and Singapore, to the frontiers of the next phase of globalization. In the words of the initiative's architect, Chinese President Xi Jinping, "A rising tide lifts all ships."
"""When these countries are linked trade will flow, when trade flows there will be human capital and cultural exchanges"
Today, there are upwards of 65 countries representing around two-thirds of the world's population and about one-third of global GDP — that are considered part of the BRI. Within the next decade, the value of trade between these countries is estimated to top $2.5 trillion per year.
"Although this is a Chinese initiative, it is actually a global initiative, linking developed economies with the emerging economies," explained Peter Wong of HSBC. "Now I think the most important thing is actually when these countries link then trade will flow; when trade flows then there will be human capital and cultural exchanges, and this will help the overall peace of the world in the long term."
Thirty-five of the countries of the BRI are located in the Asia-Pacific region — a large swath of the planet that is slated for transformative economic growth in the coming decades. HSBC estimates that two-thirds of the world's middle class will be located in Asia by 2030, with China's middle class headcount alone expected to double from 300 to 600 million people.
The McKinsey Institute report Mapping China's middle class, supports those findings, predicting that by 2022, 76 percent of China's urbanites will be middle class — a rise of 72 percentage points since 2000.
"So we can imagine that with all of these middle class (people) you're going to use more, eat more, and probably waste a little bit more," Peter Wong said. "That will enhance a lot of trade and a lot of demand on commodities."
When countries connect, markets boom
The Belt and Road Initiative is blazing new economic corridors around the world, with key overland and sea routes emanating from China and Hong Kong wrapping up the Eurasian landmass and eastern Africa, like the laces around a baseball. There are now three functioning overland routes going from east China to Western Europe, and the Trans-Asia Railway, which connects Kunming in southwestern China with Singapore, is rapidly coming together. On top of this, there is a complex network of maritime routes which tie in Hong Kong and Singapore with a wide-range of emerging ports throughout Southeast Asia, the Indian Subcontinent, the Middle East, Africa, and Europe.
Each of these economic corridors is made up of three components: trade, investment, and private wealth flow, which all combine to stimulate local economic activity and growth and on-the-ground development.
In many ways, the BRI is the logical continuation of a development program that began decades ago. When China began its first experiments with Reform and Opening, Guangdong was the first region to open up to outside trade and investment. Businesses and financial institutions in Hong Kong were among the first to stride across the newly opened frontier, raising funds at home and deploying them in Guangdong, which resulted in the place becoming a boomtown unlike anything else in history. In 1978, the GDP of Guangdong was a paltry $11 billion. Last year, the province cranked out over $1.2 trillion of economic output — more than the entire country of Spain and over 10 percent of China's total. In terms of on-the-ground impacts, Peter Wong points out that when his clients first began investing in Guangdong, the average wage was around 1,500 Hong Kong dollars. It now tops 13,000 Hong Kong dollars.
The success of Guangdong was tapped and deployed up China's east coast, and cities such as Xiamen, Shanghai, and Tianjin prospered.
Then in 2000, the "Go West" strategy aimed to spread the economic momentum of the coast inland. A new transportation grid was laid over the country, cosisting of over 60,000 kilometers of new highways, more than 25,000 kilometers of high-speed rail lines, and more than a hundred new airports. High-tech and other industrial parks were built along these new transport hubs, and both domestic and foreign companies were encouraged to move production inland. Foxconn / Apple moved to Zhengzhou, HP went to Chongqing, Dell landed in Chengdu, as hundreds of big companies migrated away from eastern cities like Shenzhen to the new frontiers that were being opened to the west. Now, some of the most economically dynamic cities in China are Chengdu, Chongqing, Xi'an, Changsha, Wuhan, and Guiyang — new boomtowns that until recently were backwaters. Seven of China's 10 best performing cities of 2017 are located inland, according to a study by the Milken Institute.
Now, the BRI is intending to take the "Go West" strategy even further. Not only are western Chinese cities like Urumqi, Horgos, and Kashgar being transformed into extremely linked in pan-Eurasian hubs of commerce, but similar transport-oriented development projects are being spread through Southeast Asia, Central Asia, the Middle East, and Eastern Europe. However, the idea is still the same as with Guangdong in the 80s and the "Go-West" strategy in the 00s: link in new markets with high-quality transport infrastructure, add on adequate energy capacity, and then build a platform for investment with new logistics hubs, industrial zones, financial centers, and residential / commercial areas.
Hardly 35 years ago, the city of skyscrapers and luxury malls that we know Dubai to be today didn't exist, the iconic skyline of Shanghai's Pudong financial district was still in its planning stages, the booming 11-million+ metropolis of Shenzhen was a string of fishing villages, and, just 50 years ago, even Singapore was an under-developed country with a GDP in the range of $320 per capita. The lesson here is that places change — and with the creation of transportation routes and economic corridors linking developed markets with emerging ones, the world's supply chains and investment flows can be redirected to new outposts of progress, whereupon the backwaters of today can become the boomtowns of tomorrow. It is precisely this kind of change that the Belt and Road Initiative endeavors to bring to the newly opened markets of Asia, Africa, and Eastern Europe.