Surveying Asian Business Trends: How will the One Belt, One Road policy affect maritime trade?
“The goal is to revive flagging economic growth in China, find new markets for capacity in its industries, and reinforce the country’s expansionist ambitions across Asia,” he told the Norway-Asia Business Summit 2016.
The belt refers to a land-based new “Silk Road” while the road is a maritime route through the Indian Ocean, with both aiming to focus on Eurasian cooperation and connectivity. A budget as high as USD 225 billion has been floated for the long-term success of the strategy, said Mr Bray.
While One Belt, One Road attempts to impose a regimen from an external source, this year also saw the implementation of the ASEAN Economic Community (AEC), noted Mary Boyd, director of the Economist Corporate Network in Shanghai. There is a “noodle bowl” of trade agreements already in place for ASEAN members, but the AEC hasn’t made a large impact yet as the process has been bureaucratised for the most part, she said.
“It’s important to note what the AEC isn’t when comparing it to other regional economic blocs: it doesn’t have a customs union, labour market standards, a single currency or professional accreditation,” said Ms Boyd.
One trend The Economist spotted in Southeast Asia through surveys is an integration of corporate approaches to urban markets across the region. Another 90 million people are expected to transfer to cities in ASEAN by 2030.
A second trend is supply chain manufacturing has shifted from North Asia to ASEAN, with Japan, Korea and China outsourcing their investment to this region, which will affect maritime routes, she said. This means more short-haul shipping services.
China comprised 19.1% of ASEAN’s total trade in 2014, and has been the region’s largest trading partner since 2009. China’s overcapacity and deflation are then a significant concern for Southeast Asia, as my publication puts that country’s risk of a hard landing at 40%, said Ms Boyd.
The Trans-Pacific Partnership has led to much speculation about its effect on global trade, and Vietnam has used its membership in much the same way China did in the 1990s as it prepared to join the World Trade Organization: to push through domestic reforms that had been difficult, she said. For Vietnam, that means higher protection of intellectual property, upgrading labour standards and improving the business environment.