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John Ross: Western companies getting serious about infrastructure initiative


Source: Global Times    Published: 2016-12-11


It has been three years since President Xi Jinping proposed China`s "One Belt and One Road" initiative ("B&R" initiative), and Western companies are finally taking serious note. The initiative, with its focus on infrastructure construction abroad, has garnered attention of companies such as Caterpillar Inc and associations such as the China-Britain Business Council. They see the "B&R" initiative as an enormous opportunity. Experts have said that the infrastructure demand in countries and regions along the "B&R" is a prize worth fighting for, yet the late-comers may face challenges getting in on the initiative.

China`s "One Belt and One Road"initiative ("B&R" initiative) has been appearing more and more in foreign companies` strategy books, experts said, and their participation will help the initiative succeed, despite the competition from Chinese companies.

Formally called the Silk Road Economic Belt and the 21st Century Maritime Silk Road, the "B&R" initiative was proposed by Chinese President Xi Jinping in 2013.

Countries and regions along the "B&R" make up 63 percent and 29 percent of the global population and economy, respectively.

The initiative calls for billions of dollars in investment, with infrastructure being a key focal point. Over the course of 2016, a growing number of foreign companies have taken an interest in the initiative.

In May, the China-Britain Business Council released a report on British and Chinese companies partnering in countries along the "B&R." The report identified infrastructure and advanced manufacturing as two areas that stand to benefit from the initiative.

Foreign participation

A prime example of foreign interest in the initiative is the 28-page white paper recently released by the US construction and mining equipment giant Caterpillar Inc, which stated its vision and commitment for the shared success of the "B&R."

Believing the initiative presents "an enormous opportunity" for the world, the company sees the initiative as "an open and inclusive" framework, according to media reports on November 30.

"It is not intended as and cannot be a solo effort of China," the white paper stated.

The company also stated its understanding on what factors will lead to the success of the "B&R," such as innovation, collaboration and sustainability.

Suffering double-digit losses in 2015, in part due to a slowdown in the world economy, Caterpillar has seen rapid growth in business related to "B&R" projects in Southeast Asia, the Middle East and Russia in 2016, according to media reports.

"Caterpillar is the world`s largest producer of construction equipment, and therefore its interest in the `B&R` initiative is highly significant," said John Ross, a senior fellow with the Chongyang Institute at Renmin University of China.

The demand for infrastructure from countries and regions along the "B&R" is a prize that has captured the world`s attention, said Tian Yun, director of the China Society of Macroeconomics Research Center.

"US companies are wise to pay close attention to business along the initiative, but many uncertainties remain concerning how US firms will get involved," Tian told the Global Times on Thursday.

When the "B&R" initiative was proposed, the US was unlikely to support it, experts said, and not much as changed as of now.

Consequently, US companies may face some obstacles to getting in on the initiative, Tian said. Chinese companies will likely purchase mechanical equipment from US firms to use on "B&R" projects, but under those circumstances the US would be "just a follower, not a leader," Tian noted.

If US companies persuaded President-elect Donald Trump`s administration to join the Asian Infrastructure Investment Bank (AIIB), the country could play a larger role in the "B&R," Tian noted.

James Woolsey, a senior adviser to Trump, called Washington`s spurning of the China-led multilateral lender "a strategic mistake" and expected Trump to have a "much warmer" response to the "B&R" initiative, the South China Morning Post reported on November 10.

The Chinese government welcomes the participation of foreign investors, even if their home countries are not part of the initiative, according to media reports in April 2015.

As of mid-August, China has reached an important consensus with France, Germany, South Korea, the UK and Spain on working together.

Coming competition

At the moment, Chinese engineering firms such as machinery maker Zoomlion Heavy Industry Science & Technology Co and Sany Group stand as the main beneficiaries of the many infrastructure projects along the "B&R," experts said.

For instance, in September, Zoomline signed cooperation deals with the Belarusian government for engineering machinery, agricultural machinery and sanitation machinery, according to the company`s website.

The company runs a joint venture with a local counterpart inside an industrial park in Belarus.

With more Western companies on board, competition may increase.

"There is no fundamental problem of `competition` of Chinese and Western companies in the `B&R,`" Ross told the Global Times on Friday. "The fundamental architecture, idea and leading role in the `B&R` initiative are developed by China."

"But naturally Western companies have specific fields of expertise, which are valuable to integrate into China`s overall framework," Ross noted.

Believing Western companies` impact on their Chinese competitors would be small, Tian also expressed his doubts about whether the equipment provided by US firms such as Caterpillar in the "B&R" countries and regions has an advantage.

Doing business along the "B&R" is quite different from doing business in European markets because payments are not made in a timely fashion, which is something that US companies will need to know about, Tian said.

Along with US firms, an increasing number of companies from Europe, such as the UK and Germany, will show more interest in the market, experts said.

Companies from the UK and Germany will have easier access to the markets along the "B&R" because the countries are members of the AIIB,  Tian noted.

Indeed, more Western companies are taking note of the "B&R" initiative.

The Royal Institute of Chartered Surveyors, one of the world`s most important organizations for real estate, infrastructure and construction, will hold its annual conference on the "B&R" initiative in Shanghai in March in partnership with Chongyang Institute for Financial Studies.

Many leading Western property developers and construction companies plan to attend the event.


John Ross is a senior fellow with the Chongyang Institute for Financial Studies at Renmin University of China.


Key Words: Belt and Road   infrastructure   western  

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