Can we gain from China’s Silk Road Policy?

In the latest edition of The Economist, there is an interesting article about China’s relentless expansion in trade and manufacturing abilities.

Few doubt that the excess production of its steel and other materials will continue unabated so it is no wonder that more efforts are devoted to expanding markets beyond present borders. China’s imperial policy over the past centuries helped to establish the Silk Road, a network of trade routes that linked China to Central Asia and the Arab world. The name came from one of China’s most important exports – silk. In 2013, China’s president, Xi Jinping, proposed establishing a modern equivalent, creating a network of railways, roads, pipelines, and utility grids that would link China and Central Asia, West Asia, and parts of South Asia. This initiative, One Belt and One Road (OBOR), comprises more than physical connections. It aims to create the world’s largest platform for economic cooperation, including policy coordination, trade and financing collaboration, and social and cultural co-operation.

As a result of the global recession in 2008, many Western economies stalled and reduced orders from China. This resulted in overcapacity in China ranging from real estate to steel and cement. Not a moment too soon, President Xi Jinping allocated the massive sum of $900 billion to fund a global initiative and one expects that this money will have a positive multiplayer effect on a number of countries. Can we blame China policymakers for seeking a return on their $3 trillion hoard of foreign exchange including a formidable sum of $1trillion in US Treasury bills?

How can Malta, a tiny island in the Med ever qualify for a part of this unique opportunity? Trade relations with China started in the early seventies when China had loaned us funds to build a number of medium sized industries and had engineered the building of the largest dry dock in Europe at a time when unemployment was relatively high following the oil price shocks when OPEC unilaterally tripled prices of crude. Since then, Malta has diversified its industry and developed its transhipment business facilitating the movement of thousands of containers coming from the “Silk Road” entering the Med to be temporarily housed in our Freeport and later redistributed to other ports in Europe.

The Freeport was privatised and the new owners invested in more gantries and software management. It is now rendering good returns to the French shareholders and of course, it constitutes a good source of employment – well-paid workers are active over three shifts. This begs the question – can Europe consulting firms stand to gain in this China initiative? The scope for professional services to hundreds of new companies being incorporated is exciting and this year PKFI has invited a number of its offices to a grand meeting in Duisburg (Germany) at the offices of PKF Fasselt Schlage to discuss strategy with their Chinese counterparts. This meeting will be followed with an invitation to Chinese investors to a two-day conference in Beijing this month. The PKF offices include Australia, Munich, Cyprus, Malta, London, Italy, New York, Beijing, Pakistan, Hong Kong and Shanghai. These consulting offices provide services to Chi- nese companies planning to invest outside China. Furthermore, they provide support to companies who are cooperating with Chinese investors − whether in Mainland China, Hong Kong, Taiwan, Europe or worldwide.

Another active member of the China desk is New York office. Founded in 1891, PKF O’Connor Davies has evolved from an accounting firm into a team of high calibre professionals that provides a global, growing client base with comprehensive accounting, auditing, tax and specialized management advisory services at the highest level. A recent addition to growing list of PKF offices in Hong Kong, Beijing and Shanghai is ZG. In the Duisburg meeting, Gengchun Yao, Chairman of ZG, expressed his satisfaction that the organisation of a China desk at each PKF office will contribute towards a successful implementation of OBOR. In his opinion, the China desk at each of the participating firms underpins a unity of purpose. They want to be part of this OBOR success story.

China is also very much active in the research and development field. Its Pearl River delta is a melting pot for a multitude of research companies all trying to emulate the success of Silicon Valley. This is an extension of the OBOR policy as it plans to export expertise in a number of unique products and services to beat its competitors in the West.

Can Malta interest Chinese investment to set up an extension of their R & D initiative in Europe? It is no secret that Malta is under performing in R & D. The Rector of the University, in an interview with Vanessa McDonald last month, said he believes that the quan- tum leap will only come when appropriate funding is made available. There is no sustainable research culture and no ecosystem in Malta as only 30 PhD qualify per annum. By 2020, we pledged the EU that we would invest an extra €200 million but so far, we are miles off that target and regrettably, our manufacturing industry has no local R & D facilities. It is not a pipe dream and, as government has attracted substantial investment through Shanghai Electric to collaborate with Enemalta in power generation, it is not beyond imagination that China is persuaded to extend its Silk Road policy to Malta.

A unique example of OBOR put in action is China’s Ningbo Shipping Exchange which is collaborating with the Baltic Exchange on a container index of rates between China and the Middle East, the Mediterranean, and Europe. Can our country, albeit small and lacking indigenous materials rise to the occasion and surf gloriously over the tide to seize this opportunity? A fully funded R & D facility is the elixir which can solve our current isolation culminating in a dearth of inventions and creativity in Life Sciences. No doubt, this will help unite the collective faculties of our universities, technical institutes and medical schools to pursue cutting-edge research particularly in Oncology, Nanotechnology and bioscience subjects.

Boldly embarking on this ambitious roadmap will shine a light to guide us along a shadowy tunnel at the end of which we can underpin GDP growth and improve our competitiveness level. Only thus can we grasp the opportunities that the Silk roadmap is offering.