28 Jul 2016

Trends in Global Trade Pacts: “Belt and Road” and “Trans-Pacific Partnership”

By Dr Tse Kwok Leung, Head of Economics & Policy Research, Bank of China (Hong Kong) Limited

To promote its “Belt and Road” strategy, China is currently conducting four major tasks. The first is the planning of infrastructures, and priority projects include the construction of three high-speed rail networks traversing Europe and Asia. These include the Eurasian High-Speed Railway, the Central Asia High-Speed Railway and the Trans-Asian Railway. Commencement of the Eurasian High-Speed Railway is expected to take place this year. The rail link begins in Beijing and enters Russia, heading through Moscow and on towards Warsaw, Berlin and Paris, with London as a possible terminus. The Central Asia High-Speed Railway begins in Urumqi and heads through Uzbekistan, Turkmenistan, Iran, Turkey and Germany. The Trans-Asian Railway, on the other hand, will span more than 3,000 km. It begins in Kunming and heads to Singapore, going through Southeast Asian countries such as Laos and Malaysia. Based on its current progress, the rail project is expected to be completed by 2020.

The second task involves port infrastructure projects. Gwadar Port in Pakistan is one of the highlights. Gwadar Port is not only a pier where goods both enter and leave, it is also expected to develop into a modern industrial park where an array of high value-added activities will take place. Eventually, it is expected to grow into a logistics hub.

The third task is to establish overseas trade and economic cooperation zones. According to the Ministry of Commerce, China has established 118 trade and economic cooperation zones in 50 countries across the globe. Of these, 77 are located in 23 countries along the route of the “Belt and Road” initiative. At present, most companies operating in these zones are privately-owned enterprises of Mainland China. Hong Kong companies are also welcome to take up tenancy in these zones. They are important fulcrums of the “Belt and Road” initiative.

The fourth task is to set up or take part in multilateral financial institutes, including the Asian Infrastructure Investment Bank (AIIB), the BRICS New Development Bank, the Silk Road Fund and the European Bank for Reconstruction and Development. The AIIB officially commenced operation on 16 January 2016. Headquartered in Beijing, the AIIB has 57 Prospective Founding Members, and an initial registered capital of USD 100 billion.

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