A new global megaproject, unparalleled in scope and ambition, presents vast opportunities and risks for multinationals.

As of early 2018, a new elevated railway in Hanoi is giving commuters a smoother journey into the city. The 13.5 kilometer (8.4 mile) line, which snakes across the Vietnamese capital’s shimmering West Lake, is one element of a much larger rail project that will connect the landlocked Yunnan Province in China directly to the northern Vietnamese port city of Hai Phong, providing access to markets in Southeast Asia and beyond.

Many time zones to the west, the London suburb of Barking has the distinction of being the first English town with direct rail access to China. In January 2017, it welcomed the arrival of a freight train that had traveled 12,000 kilometers (7,500 miles) from eastern China’s Zhejiang Province, with a cargo of garments and handbags. The so-called “East Wind” train made history by retracing part of the ancient Silk Road that more than 2,000 years earlier had linked northern China to the Mediterranean. The railroad traversed Kazakhstan, Russia, Belarus, Poland, Germany, Belgium, and France on its journey to Britain. But it should not be regarded as a pure U.K.-to-China transport link. Once fully operational, it will pick up and drop off goods at many countries in between, thereby opening up parts of Russia and Central Asia that have never before had this type of entrée to the global economy.

These rail projects, which share the same visionary origin, are just two of dozens of road, rail, port, and power generation plans within China’s much-vaunted Belt and Road Initiative (BRI). Formerly known as One Belt, One Road, this vast, interconnected infrastructure project spans at least 65 countries with a combined population of 4.4 billion and about a third of the world’s economic output.

The plan is notable not just for its scale, but for its time frame. Its first phase focuses on infrastructure development, specifically in transportation, communications, and power. The second phase will involve softer sectors such as e-commerce, healthcare, education, and financial services. The first projects are just starting now, and the whole initiative is not expected to conclude until at least 2050.

Already, the rail elements of the plan alone rank as one of the biggest infrastructure pushes ever undertaken. The total estimated value of its 18 planned Chinese high-speed rail projects — of which five are under way — comes to US$143 billion, according to calculations by the Center for Strategic and International Studies, a U.S. think tank, and the Financial Times. That is larger than the U.S.-led Marshall Plan, which spearheaded the revival of Europe after World War II and cost about $130 billion in today’s money. Indeed, compared with the BRI, the Marshall Plan was modest in its ambition: It sought to rebuild the old, war-torn economies of Europe. The BRI is focused on developing new economies around the world, and fostering global trade among them, not just with China.

Moreover, the BRI represents a multistage conception that goes beyond basic capital investment. It will eventually embody leading-edge digital technologies such as embedded sensors and data analytics, thereby giving participating countries the ability to leap past current Western supply chain practices. In doing all this, the BRI could spark a 21st-century expansion of global economic growth, technology exchange, and, inevitably, Chinese influence.

The BRI is not the only comprehensive initiative of this sort emerging in the 21st century, however. Industry 4.0 initiatives from Germany and cloud-based platforms from the United States may eventually interface with it, compete with it, or both. But the ambition and scope of the BRI are even greater than those of its international counterparts. That’s why it is such an important — and complex — strategic opportunity for global enterprises. China has invited companies from other countries to do business with the BRI by investing their financing, technology, or other forms of capital. These investments may give them access to barely tapped markets destined for future growth, while cementing a better foothold in China itself. The relationships companies build with their Chinese partners, including host companies from countries along the BRI pathways, could lead to many opportunities in China and around the world.

Pursuing the Chinese Dream

With all these uncertainties at play, an assessment of the best strategy for your company must start with an understanding of China’s motivations, capabilities, and limits. The concept for the initiative was first unveiled in 2013 by Chinese president Xi Jinping (see “Historic Roots, Grand Ambitions”). Its goals were reaffirmed in late 2017 at the 19th Chinese Communist Party Congress (the congress is held every five years). There, a reference to the initiative was formally added to the party’s constitution. Along with the elevation of Xi to the status of “core leader” (a title held previously only by Mao Tse-Tung and Deng Xiaoping), there could be no clearer sign of the BRI’s importance to China’s national development.

Read more: https://www.strategy-business.com/feature/A-Strategists-Guide-to-Chinas-Belt-and-Road-Initiative 


Please enter your comment!
Please enter your name here