Funds: Look to India for returns, not China’s belt-and-road

SYDNEY: Some of Asia’s biggest infrastructure investors are seeing plenty of opportunities in India. In China’s mammoth Belt-and-Road initiative, however, not so much.

India is a key market for Macquarie Group, thanks to strong economic growth and state asset sales, said Frank Kwok, co-head of Asia Pacific at Macquarie Infrastructure & Real Assets. Hence its recent purchase of nine tollroads with charges indexed to inflation.

China’s Belt-and-Road, however, is more driven by geopolitics than investment returns, he said at the Bloomberg Invest Australia summit in Sydney.

“It’s very much a China-led initiative, but really it’s about the entire region,” said Kwok. “But because one of the main drivers is that it’s for China to exert its influence over the region, financial returns are probably not the top priority.”

Asia’s developing economies will need to spend about US$22.6 trillion on projects like roads, bridges, ports and railways over the 15 years to 2030 in order to maintain economic growth and reduce poverty, according to the Asian Development Bank. China has stepped in to fund some of those investments with Belt-and-Road.

President Xi’s vision, first proposed in 2013 and now enshrined in the Communist Party’s constitution, involves spending as much as US$1.2 trillion on railways, roads, ports and power grids over the next decade, according to Morgan Stanley. The intent is to open new business opportunities for domestic companies and extend China’s reach – even though the route cuts through multiple conflict zones and some of the world’s most corrupt countries.