Business Environment: Analysis of China's Belt and Road Initiative

This report analyzes China's Belt and Road Initiative (BRI), a project aimed at strengthening regional synergy and improving interconnection on a multi-national platform. The BRI, encompassing the Silk Road Economic Belt and the New Maritime Silk Road, presents significant opportunities, including increased trade, investment, and infrastructure development, especially for underdeveloped nations. However, the report also identifies potential risks, such as policy barriers, environmental and social concerns linked to infrastructure projects, and macro-economic risks like debt sustainability. The analysis emphasizes the need for policy reforms, infrastructure development, and comprehensive risk management to maximize the benefits of the BRI while mitigating its potential downsides. The report concludes by suggesting that policymakers should focus on evaluating existing interconnection gaps, assessing the economic impacts of BRI projects, and implementing complementary policies to promote inclusive development and reduce associated speculations.

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Business Environment
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Business Environment
The Belt and Road Initiative (BRI) of China is one of the progressive projects that are made
to strengthen the regional synergy and improvise the interconnection on a multi-national
platform and is an effort to widen the commercial undertaking to leverage modern
infrastructure and advantage to underdeveloped sections of the world. While the outlook of
the BRI is taking shape it includes mainly the Silk Road Economic Belt that will connect
China to Central and South Asia and further to Europe and the New Maritime Sil Road that
will link China to countries of South East Asia, the Gulf nations, North Africa and to Europe.
Moreover six other economic routes has been established to connect other nations to the Belt
and the Road1. There have been constant debate on China’s intentions behind the initiative
and some experts establish that China is utilizing the commercial bridgeheads as corridor to
give their warships and military more power by acquiring more ports across Indian Ocean
which is a purposeful effort to reinforce China’s political power and expand their military
reach so The Belt and Road Initiative is a questionable deal.
Analysis of Opportunities
The economics of BRI on analysis is a layout that can stimulate three major opportunities
linked with the deal:
Enormous size and reach: BRI economies hold for 1/3rd of world GDP and commerce and are
close to 2/3rd of global population. For few BRI nations, poverty ratio and percent of
population living below poverty line (1.90 $/day) is large such as 25% in Kenya, 23% in
1 Keith Johnson and Dan De Luce, ‘One Belt, One Road, One Happy Chinese Navy’, FP
REPORT [Online], 17 April 2018 < https://foreignpolicy.com/2018/04/17/one-belt-one-road-
one-happy-chinese-navy/>
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Business Environment
Uzbekistan and Djibouti, 21% in Laos. So the scope of BRI projects is rewarding for these
nations as it will outstand to advantage a huge amount of underprivileged population and
huge swaths of global economies through better worthwhile surplus impact over universal
wellbeing.
Huge unexplored prospective: BRI projects are largely unified with other nations and with
one another. Currently, BRI nations increase in world exports has largely doubled since past
two decade though particularly China is open for biggest stake of such exports.2 Commerce
across several BRI economies like Afghanistan, Nepal, Tajikistan and Laos is underexplored
because of poor infrastructure, unsteady policies and other gaps, so the BRI project is
rewarding for such countries to fix these gaps and will improve global economies, trade
specifically for nations that had been incapable to completely unite in the global economy.
Boost in interconnections: currently in 30 days consignments can be shipped between China
to Central Europe with materials being shipped through sea. Though transporting materials
through rail can lower shipping duration to half but it would cost more. As such there is a
disposition amid saving time and money as every day’s wait in getting goods from production
place to customer is approximated to lower business by 1%. Hence improvising scope and
network of rail and other transportation infrastructure can result to extensive cross border
commerce, rise in investments and better development through support of the Belt and the
Road Initiative3. Also coordination’s between regions on infrastructure development is
2 Anja Manuel, , ‘China is quietly reshaping the world’, The Atlantic, Aspen Strategy Group
Publication. [Online], 17 Oct 2017 <
https://www.theatlantic.com/international/archive/2017/10/china-belt-and-road/542667/
3 Xiamen, ‘China has vastly ambitious plan to connect the world’, The Economist [Online], 26
July 2018 < https://www.economist.com/briefing/2018/07/26/china-has-a-vastly-ambitious-
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Business Environment
required to resolve the challenges to improve size of transport and network to connect the
world. As such BRI project of China will support to begin making trade convenient in several
nations of the world which are very significant economic corridors.
Analysis of Risks
But the pursuit of Belt and the Road Initiative of China along with a win-win deal will also
put some risks related to the initiative, which are:
Policy barrier creating tight boundary: in an average delay in crossing border, inconvenient
customs process and constraints on FDI will be more important in BRI nations as compared
to other parts of the world. The indicators of doing trade represent that in Central Asia for
instance, it may take around 50 days to adhere to all proceedings in order to import
consignment while it takes less than 10 days in G7 nations. As BRI nations have more
opposed and complex FDI policies compared to OECD nations in context to beginning an
offshore business, accessing industrial resource and mediating commercial challenges so BRI
initiatives need some policy reforms and extensive coalition to complement the infrastructure
projects so as to improve interconnections.
Risk linked with prime infrastructure projects: there are prospective environmental, social
and corruption risk linked with larger infrastructure projects and these can involve for
instance reduction in biodiversity, environmental degeneration or exclusive capture. These
risk can be particularly important in nations included in BRI project which have
comparatively poor governance and these will be required to be recognized and protected in
place to reduce their prospective adverse impacts. Several Multilateral Development Banks
plan-to-connect-the-world>
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Business Environment
can play a role in backing execution of better environment, social and governance protocols
for BRI investments.
Macro risks: for few nations funding needed for BRI project may extend debt to inappropriate
level like for example construction of Lao PDR section of Kunming-Singapore Railway has
approximate cost of 6 bn USD which is about 40% of GDP of Laos so the jurisdiction is
trying to reduce influence of project over public funding by restricting their part to about 0.7
bn USD, of which 0.5 bn USD is funded by Chinese loan to government of Lao PDR. As
such it is approximated that BRI projects will raise debt to GDP ratios in some BRI nations
thus exerting 8 of them to larger threat. Nations engaging in BRI nations will require to
balance demand for these expansion projects with susceptibilities imposed through rise in
debt levels4. In another instance of Hambantota port built by China in Sri Lanka due to rise in
loan the port passed into control of China in 2017 along with 69 sq km of land after Sri Lanka
failed to serve debts incurred in construction. So these are risks that are linked to some
nations being funded in BRI projects.
Hence it can be concluded from analysis of BRI project of China that initiative needs to focus
on evaluation of existing interconnection gaps such as transportation, communication,
investment etc in BRI nations. Secondly an evaluation of prospective economic impacts of
outlined BRI infrastructure such as influence on foreign trade, cross border investment,
allocation of economic interest and inclusive development need to be considered and also
complementary policies and agencies that would extend improvement advantages for all BRI
nations in trade, investment, procurement reforms through social, environmental and
4 Maria Abi-Habib, ‘China’s Belt and Road Plan in Pakistan takes a military turn’, The New
York Times [Online], 19 Dec 2018
<https://www.nytimes.com/2018/12/19/world/asia/pakistan-china-belt-road-military.html>
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Business Environment
governance protocols need to be identified. Hence with these initiatives policymakers can
maximize potential of BRI and reduce associated level of speculations.
Reference
Johnson., Keith and Luce., Dan De, ‘One Belt, One Road, One Happy Chinese Navy’, FP
REPORT [Online], 17 April 2018 < https://foreignpolicy.com/2018/04/17/one-belt-one-road-
one-happy-chinese-navy/>
Maria Abi-Habib, ‘China’s Belt and Road Plan in Pakistan takes a military turn’, The New
York Times [Online], 19 Dec 2018
<https://www.nytimes.com/2018/12/19/world/asia/pakistan-china-belt-road-military.html>
Manuel, Anja, ‘China is quietly reshaping the world’, The Atlantic, Aspen Strategy Group
Publication. [Online], 17 Oct 2017 <
https://www.theatlantic.com/international/archive/2017/10/china-belt-and-road/542667/
Xiamen, ‘China has vastly ambitious plan to connect the world’, The Economist [Online], 26
July 2018 < https://www.economist.com/briefing/2018/07/26/china-has-a-vastly-ambitious-
plan-to-connect-the-world>
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