Thursday 18, May 2017 by William Mullally

New Silk Road: China pledges additional funding

At the first New Silk Road Summit, China took the lead and pledged additional funding for infrastructure development. We expect construction firms, telecommunications equipment companies, rolling stock manufacturers and port operators to be the major beneficiaries of the New Silk Road initiative, writes Jiazhi Chen Seiler, Head Next Generation Research Analyst, Julius Baer

The first New Silk Road Summit took place in Beijing on 14-15 May. Around 30 heads of states and governments − as well as delegates from over 100 countries, including the United States and North Korea − met in the Chinese capital to discuss the ‘One Belt, One Road’ (‘OBOR’ or ‘New Silk Road’) initiative, proposed by Chinese President Xi Jinping in 2013.

It is a development strategy and framework, which focuses on connectivity and cooperation among countries − primarily between China and Eurasia. It consists of two main components: the land-based ‘Silk Road Economic Belt’ and the ocean-going ‘Maritime Silk Road’ − and is also referred to as China’s ‘New Silk Road’ initiative in western media. The key pillar of the regional integration efforts envisaged by this initiative, in our view, is infrastructure development.

The land-based and ocean-going ‘New Silk Road’ covers about 65 countries along its routes, representing 70 per cent of the world’s population and 75 per cent of its energy resources. The total output of these countries represented 66 per cent of global output in 2015. During the summit, the delegates agreed to work together to build roads, railways, ports and other key infrastructure as part of the world’s biggest economic diplomacy programme. President Xi Jinping gave the opening speech and pledged an additional RMB 100 billion for China’s Silk Road Fund, RMB 380 billion in new lending for participating nations, and RMB 60 billion to developing countries and international organisations wishing to join the initiative. China will also encourage financial institutions to conduct an estimated RMB 300 billion in overseas business using the renminbi (China’s currency).

According to the Xinhua News Agency, Chinese investment in OBOR countries has surpassed USD 50 billion since 2013. Chinese Commerce Minister Zhong Shan also informed participants that China plans to import USD 2 trillion worth of products from countries participating in its New Silk Road Initiative over the next five years.

The New Silk Road Summit has demonstrated the commitment of the People’s Republic of China and New Silk Road countries to open up their economies and promote free trade. Infrastructure building has been at the centre of this initiative. We expect construction firms, telecommunications equipment companies, rolling stock manufacturers and port operators to be its major beneficiaries.

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