FOR GREATER COOPERATION
Asian businesses will benefit tremendously from the linkages formed, says HSBC chief
CHINA’S inaugural Belt and Road Forum this month comes at an historic inflection point. China will showcase major infrastructure projects to advance this ambitious initiative, but the tone world leaders adopt in their dialogue on trade could prove to be just as significant.
“While rapid increases in the complexity of global supply chains may have peaked, what we’re now seeing is growing interest in inter- and intra-regional trade.
“China’s role in driving these flows is increasingly important, and nowhere is this role more vis- ible than through the One Belt One Road (OBOR) initiative,” said Mukhtar Hussain, chief executive officer of HSBC Bank Malaysia Bhd.
He said China sought to stimulate cross-border trade by investing in railway tracks, ports and power plants along centuries-old silk routes.
“This isn’t just trade with China’s neighbours, but with regions as far afield as Europe, Africa and the Middle East,” said Mukhtar.
The commercial benefits of this initiative are already becoming apparent. In the first nine months of last year, China companies signed 4,000 engineering contracts under the Obor umbrella, with a combined value of nearly US$70 billion (RM304.4 billion).
Looking ahead, HSBC said, the completion of new infrastructure would simplify supply chains, accelerate physical trade and push down the cost of doing business.
“Companies will adapt their manufacturing and distribution strategies to capitalise on these new opportunities, with the net result that the volume of trade will grow.”
China anticipates its trade with countries along the land “belt” and marine “road” will surpass US$2.5 trillion annually in the next decade.
HSBC forecasts that about three billion people in today’s emerging markets will join the middle classes by 2030, a social change that will pull the centre of gravity of human consumption towards Asia.
“Preparing for this growth, China has pledged to help Laos build a US$6 billion railway linking Vientiane to China’s southern Yunnan province. Meanwhile a 7,000km Singapore-Kunming Rail Link is already taking shape, and Beijing has won the contract to build Indonesia’s first highspeed rail link — a US$5.1 billion, 150km project connecting Jakarta to Bandung, Indonesia’s thirdlargest city.”
Mukhtar said Obor, as a statement of intent, was ambitious and positive.
“It says that by boosting investment, we can boost trade, because this in turn will boost gross domestic product. Given the uncertainties we face today, we should celebrate that world leaders are gathering in Beijing and exhort them to use Obor as a catalyst for even greater international cooperation tomorrow.”