In September 2015, the China-Britain Business Council released a comprehensive new report on China's ambitious and complex "One Belt One Road" initiative in partnership with the Foreign & Commonwealth Office. Designed as a practical guide to where the opportunities lie for UK companies, the report contains succinct chapters on the seven key sectors and 13 major regions to help you understand what the implications are in your industry and where your next steps should be.

"UK business is poised to play an integral part ...
New markets will open and new supply chains will change the way goods move across the globe."

HM Ambassador Barbara Woodward

For more details, please see www.cbbc.org/sectors/one-belt,-one-road.

By PwC China

Summary of Major Discoveries

• Since 2014, the overseas investment transactions made by enterprises based in mainland China in the medicine field have surged, with the transaction volume climbing by over six times, the transaction amount in the first half of 2017 reaching USD4,353 million (approx. CNY28.95 billion), and the compound annualized growth rate increasing to 85%. Two reasons explain this phenomenon: on the one hand, the booming Chinese M&A market results in a declined number of quality targets with higher valuation, thus domestic enterprises shift their focus to the overseas to acquire target companies at a more proper valuation; on the other hand, the Chinese yuan is under pressure of devaluation in recent years, driving domestic enterprises to acquire overseas assets.

• Private enterprises dominate the overseas medicine M&A market, whose transaction amount in recent three years is as high as 21 times that of SOEs. This is in line with Chinese government’s support of medical cause run by non-governmental sectors, and the increasingly important role of private businesses in the medical and health market.

• In terms of specific industries, different from the medical instrument industry, domestic enterprises prefer to make overseas investment transactions in the bio-pharmaceuticals industry. However, regardless of the segment, domestic enterprises that engage in overseas investments mainly aim at introducing the overseas advanced medical resources or business model into China, to accelerate its domestic strategic layout in the healthcare business, and take the acquired firms as the platform for global expansion.

• In terms of investment destination, Chinese enterprises remain preferring to invest in the healthcare industry of developed regions such as Europe and North America. The major reason is that these countries and regions are equipped with the most advanced medical technologies, platforms and brands in the world, and have immense and mature consumption markets.

• Compared with the overseas M&As by domestic enterprises, foreign companies engage in much fewer transactions in the medicine field in China, with the transaction amount much smaller as well. It demonstrates that in the medicine investment area, “going out” outpaces “bringing in” of overseas resources, and the main reason is that domestic pharmaceutical enterprises have much space to improve their R&D capacity.

Outlook

• The central government released the Notice on Further Guiding and Standardizing Overseas Investment Directions in August 2017, which as clearly specified that “priority should be given to promoting overseas investment of infrastructure that is conducive to ‘One Belt, One Road’ development and connectivity of surrounding infrastructure”, “investment cooperation with overseas hi-tech enterprises and advanced manufacturing enterprises should be intensified, and setup of overseas R&D centers encouraged”; the Notice has provided a good policy foundation for domestic enterprises to invest in the overseas medicine field, particularly in the countries along the “One Belt, One Road”. Hence, the growth trend in the medicine investment by Chinese enterprises is expected to continue.

• In light of the “One Belt, One Road” strategy, Asia-pacific region is expected to be an emerging investment destination focused by Chinese investors. At the same time, the countries and regions in Europe and North America, domestic investors, especially private businesses, perhaps face greater pressure and challenges in overseas investment. For instance, in acquiring high-tech firms in the sensitive industries, in February 2016, a semi-conductor manufacturer rejected the USD2.6 billion takeover offer of a company under China Resources (Holdings) Co., Ltd., due to the regulatory pressure of American authority.

• Moreover, with the continuous promotion of the “One Belt, One Road” strategy, an increasing number of overseas investors may access China to invest in the medicine field, particularly in the areas that promote development of the pension services in China.

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By Chris Devonshire Ellis, founding partner, Dezan Shira & Associates

An issue when composing a book such as this, covering such a large geographical area, is the definition of what Asia actually is. This becomes especially pertinent when dealing with Asian subcategories like “Eurasia” and “Central Asia”. What do these really mean? Indeed, what is “Russia”?

Asia is defined by Miriam-Webster as “A continent of the eastern hemisphere north of the equator forming a single landmass with Europe” and further revealed to possess “numerous large offshore islands including Cyprus, Sri Lanka, Malay Archipelago, Taiwan, the Japanese chain, & Sakhalin area”.

Which taken literally would mean that the southern islands of the Maldives, being south of the equator, are not part of Asia. Neither are Indonesia and Singapore. Meanwhile, Australia, a continent in its own right and almost exclusively “south of the equator”, has also declared itself part of Asia. Existing definitions, which we have grown used to, are therefore in need of some adjustment.

Central Asia is equally tricky. Most people would identify it as a collection of Muslim states, lying directly south of Russia, and previously part of the Soviet bloc. However, this doesn’t really work. Mongolia is for example Buddhist, as many of the currently Muslim territories once were, while its capital, Ulaan Baatar, is as close to Anchorage in the United States as it is to Moscow.

Even Eurasia can be difficult. The majority of people would imagine this area to extend roughly to the boundaries of the further reaches of the Mongolian Empire at its height – including all of China, and as far west to Hungary in Eastern Europe. “The Steppes” is an expression often used to describe Eurasia. Miriam-Webster again: Eurasia is “The landmass of Asia & Europe - chiefly used to refer to the two continents as one continent”.

Russia meanwhile acknowledges its unique geographic position by maintaining the Double-Headed Eagle as its national symbol. One head faces west, the other east. Although its capital city is in the European part, 75 percent of Russian territory lies in Asia. When thinking of Asia, images of steamy jungles and elephants tend to come to mind, yet the region has a long coastline above the Arctic Circle, previously home to the elephant’s distant cousin, the mammoth. As global warming increases, we may become more familiar with the concept of Arctic lands being Asian.

The reason these definitions are changing is largely due to the rise of China, a re-think of its role in the world and its revision of domestic and foreign policy. As China spreads its influence beyond its own borders, those of us from white European stock should be reminded that the term “Caucasian” typically used to describe us in terms of race includes the word “Asian”.

For the purposes of this book however, and in accordance with Miriam-Webster’s definition of “Eurasia”, this analysis views the subject as including all of Asia - meaning from Arctic Siberia, south to countries such as Sri Lanka and Indonesia, and West to India, Pakistan and Iran. It also includes Europe because, as we will see, China’s Silk Road Economic Belt will impact upon all.

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By CITY BUSINESS Magazine (College of Business, City University of Hong Kong)

After a century of marginalisation, Central Asia transit routes are once again taking centre stage. City Business Magazine editor Eric Collins investigates the nature of the historical Silk Road, and asks why China is unveiling a new version for the 21st century.

Sinuously the Silk Road flows from ancient times down to the present. From China through the Taklamakan Desert to Samarkand at its centre, through the grassland steppe of Central Asia to the shores of the Mediterranean, it helped pioneer globalisation. Romantically we imagine spices, silks, perfumes and precious stones wending their way by camel between China and Europe. But what was the nature of this Road? Who and what travelled along it and in what direction? Was it just confined to goods? Or did ideas make the journey as well? How Broadband was this historical Silk Road? And how does it relate to its latter-day successor, the recent China development policy initiative, One Belt One Road (OBOR)?

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By Zhao Minghao (He is a research fellow at the Charhar Institute and an adjunct fellow at the Chongyang Institute for Financial Studies at Renmin University of China. He is also a member of the China National Committee of the Council for Security Cooperation in the Asia Pacific.)

Major American think tanks are beginning to take the “Road and Belt” initiatives seriously. Recently the Center for Strategic and International Studies cosponsored a symposium on the “Road and Belt” with the Chongyang Institute for Financial Studies of Renmin University of China. The CSIS has also launched its own “Reconnecting Asia Research Initiative”. Scholars with the Brookings Institution, Center for American Progress and National Bureau of Asian Research have also started corresponding research projects.

US “overreaction” to Chinese proposals has created obstacles to development of China-US relations over the past few years. In fact, Washington could have responded in more appropriate and smarter ways. The US government took great pains to dissuade European allies from joining the Asian Infrastructure Investment Bank headquartered in Beijing, on the grounds that the institution can’t meet the “highest global standards” in management and lending. Yet Britain, Germany and France chose to become AIIB founding members despite US opposition.

Financial Times chief commentator Martin Wolf, who had worked with the World Bank, said what the US was truly worried about was that China-initiated mechanisms may undermine American influence on the global economy, and Britain’s decision to join the AIIB was a significant blow to the US. Wolf was straightforward in pointing out that rise of the Chinese economy is both desirable and unavoidable, the world needs fresh mechanisms, and will not stop its progress just because the US refuses to participate. (Martin Wolf, “A Rebuff of China’s AIIB Is Folly”, Financial Times, March 24, 2015)

On April 13, AIIB president Jin Liqun and World Bank president Jim Yong Kim signed their institutions’ first framework agreement on joint fundraising. The agreement will allow the two parties to jointly fund development programs, meaning that the two international institutions have taken an important step forward in meeting the world’s tremendous demands for infrastructure. Before that, the AIIB had agreed with the US-and-Japan-dominated Asian Development Bank, European Bank for Reconstruction and Development, and the British Department for International Development on fundraising for development projects. The AIIB is expected to approve about $1.2 billion in fundraising programs, including support for road construction in Pakistan and Central Asia.

For Beijing, the AIIB is a test rather than a so-called triumph against the US. This is the first time for the Chinese to attempt to provide public goods in the field of international development, indicating Beijing is actively embracing multilateralism in global governance. Chinese leaders have sufficient motivation to support the AIIB to develop in a manner in conformity with the principle of “lean, clean, green”. The AIIB is expected to demonstrate higher efficiency, zero tolerance to corruption, and commitment to sustainable development. In particular, the AIIB hopes its staff would be a third of the World Bank’s when its registered capital equals that of the latter.

Fundraising needs for infrastructure investments will reach $10 trillion in the next decade. There will be no competition between the AIIB and other multilateral development institutions, such as the World Bank and Asian Development Bank. Instead, there is broad room for them to cooperate. Jin has stated on multiple occasions that American companies would not be excluded from the AIIB’s scope of business. American lawyer Natalie Lichtenstein, who had worked for the World Bank for nearly 30 years, has been hired by the AIIB as an adviser. The AIIB has its eyes on talents’ qualifications and capabilities, not which country’s passport he or she holds.

Beijing has also been open to Washington regarding the “Road and Belt”. During his visit to the US in September 2015, Chinese President Xi Jinping stated in explicit terms that the US is welcome to participate in the initiative.

In order to promote Afghan economic development and economic integration in Central and South Asia, the US put forward the “New Silk Road” program in 2011. By 2014, the program had been further focused on four main fields, namely developing regional energy markets, promoting trade and transportation, upgrading customs and border control, enhancing business and personnel exchanges. This is very similar to the goals of the China-proposed “Silk Road Economic Belt”, so it should be possible to dovetail the two programs.

In fact, China and the US have already been collaborating on Afghan affairs in the past few years. Now they need to take one bolder step forward. They can jointly support construction of such infrastructure facilities as power grid, upgrade of border facilities, and negotiations on border trade agreements. China and the US can also cooperate under such frameworks as the Central Asia Regional Economic Cooperation Program. In June 2015, Richard Hoagland, a senior official with the US Department of State, talked with officials with China’s National Development and Reform Commission on how to make the “New Silk Road” and “Silk Road Economic Belt” mutually complementary.

Beijing does not expect the Obama administration to enthusiastically support the “Road and Belt”, but it does hope that the American side can be serious about the tremendous potential for the two countries to formulate a global development partnership. The “Road and Belt” has offered a window of opportunities. The US should not overreact to every Chinese proposals. They are not in a zero-sum game. As veteran China expert Harry Harding said, “a more successful and confident United States would regard the rise of China with greater equanimity”. In the realm of international development, Washington doesn’t need to panic, it should instead be confident and take a different attitude – let China succeed.

Please click here to view the full article on the website of China-United States Focus.

By Joseph W. Ferrigno III, Managing Partner, AMCG Partners

Summary

A. The Belt and Road Initiative (“BnR”) is a comprehensive vision for the development of China and other countries during the 21st Century initiated by China in 2013. The Asian Development Bank has estimated that Asia needs an average US$730 billion a year in infrastructure investment until 2020, including only some of the identified BnR related projects. According to the Peterson Institute for International Economics, “…investment in the Belt and Road is expected to reach $4 trillion”.

B. Asia’s overall national infrastructure investment need is estimated to be US$8 trillion over 2010-20. BnR is attractive to governments and the private sector because of the significant potential economic and political benefits if BnR projects are successfully implemented.

C. Requirements for capital, risk absorption and management capabilities necessary to successfully implement BnR-inspired projects far exceed what governments can provide. Public/private partnerships ("PPP"), via various models, are essential to contribute ideas, capital, risk absorption and project management capabilities. The private sector, working closely with the public sector helps plan and control BnR projects resulting in projects which have the most appropriate designs, the most cost-efficient construction and the most efficient operation.

D. The implementation of PPP projects, which typically involve multiple parties of different nationalities, is highly complex and requires special expertise and experience and is more of an art than a science. The “packaging” for such projects, getting them ready for construction start, is quite difficult and requires dealing with many challenges and problems which must be solved during long project development periods.

E. In my experience with the packaging of PPP projects, in both developed and developing economies, there are effective solutions which require the relentless application of sound project implementation general principles and specific practices. Although each project is unique, and correct timing is a critical factor, such principles and practices can be applied to result in the successful implementation of PPP infrastructure projects.

F. Hong Kong is functioning effectively as a kind of “Super-connector” putting together various parties which are interested participating in BnR-inspired projects so that they have opportunities to meet and consider collaborating. In addition, Hong Kong’s well-developed project services sectors - including its expertise in infrastructure development sectors - are unique in Asia in terms of their international business orientation, depth of service, expertise and professionalism. Moreover, an essential characteristic of Hong Kong is the reliability of the enforcement of contracts. The independence of the Hong Kong Judiciary and the adherence to the Rule of Law are of high importance for international businesses, investors and creditors involved with infrastructure projects.

Please click here to view the full report.

By Vassilis Ntousas, International Relations Policy Advisor at the Foundation for European Progressive Studies

Since its introduction in the fall of 2013, China’s ‘One Belt, One Road’ initiative has been the centre of a plethora of in-depth analyses and policy announcements. Heralded by many as a centrepiece of President Xi Jinping’s foreign policy and domestic economic strategy, this grandiose initiative has certainly captured the attention of many policy-makers, analysts and commentators, marking a significant milestone in the country’s trajectory of engagement in the international milieu. Whether China’s grand design for its new trade routes will ultimately become a game-changer remains to be seen, yet its ‘back-to-the-future’ approach contained in its OBOR policy presents many potential benefits for Beijing, despite the evident risks. …
 
China’s (potential for a) game changer
 
Highly ambitious in its goals and Herculean in its proportions, the OBOR initiative has been characterised as the ‘most significant and far-reaching initiative that China has ever put forward’. If played correctly by China, the initiative has the potential of being much more than its individual parts, elevating China both economically but also politically. For Beijing, OBOR’s added value could be multi-faceted, ranging from creating new markets through economic penetration, widening the trading and commercial horizons to export Chinese surpluses, improving the innovation and competitiveness of Chinese industries, whilst providing the necessary impetus, vision, and know-how for a more coherent regional policy aimed at alleviating internal inequalities amongst provinces and for a more active and better-founded foreign policy that will promote the Chinese interests in a more reliable and efficient manner.
 
Inherent in the project’s vision and scope, both in its continental and its maritime component, one can also trace the many obstacles that exist and that will largely decide the project’s future success. Although the initiative is still in its early stages, critics point to the its sheer size and ambition as the source of many vexing challenges: from the incredibly varied political, economic, legal and regulatory framework within which OBOR will have to function, to the political uneasiness, if not antipathy, it could create in many areas along its routes. Regardless of the levels of financial firepower that will be employed, building a network of Sino-centric trading routes along a milieu of great diversity and even greater risks will lead China to engage more actively with regional affairs. If the initiative succeeds, whether it is the intention of Beijing or not, this will create both an opening and an additional layer of risk: China’s rise, not least in the economic sphere, will embolden the country’s position internationally, yet, as the eyes of the world focus more on China, there will be a greater degree of scrutiny regarding its praxis in the region. Whether China’s Grand Design for its new trade routes will ultimately become a game-changer remains an open question, yet its ‘back-to-the-future’ approach contained in its OBOR policy presents many potential benefits for Beijing, despite the evident risks.

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By The Economist Corporate Network

The Silk Road Economic Belt and 21st Century Maritime Silk Road - better known by its popular shorthand terms of One Belt, One Road (OBOR) and the Belt-Road initiative - has become one of the most discussed topics about China’s evolving role in the global economy today. The Economist Corporate Network has produced "One Belt, One Road": an economic roadmap to add clarity to the discussion and stimulate more informed consideration about the implications of OBOR. To that end, this report explores seven key regional spheres covered by the Belt-Road initiative: Africa, Central Asia, Eastern Europe, the Middle East, Russia, South Asia and South-east Asia.

As Belt-Road projects heavily emphasise infrastructure development, the regional mapping lists out infrastructure project pipelines. These lists do not aim to provide a complete accounting of projects but rather a varied sampling to show the types of development activities that characterise a region. For the sake of transparent, readily verifiable data, the lists draw from publicly accessible sources such as the World Bank, InfraPPP and CG/LA Infrastructure’s Strategic 100: 2016 Global Infrastructure Report. The information is current as of February-March 2016. The regional analysis sections also give overviews of the infrastructure needs of a region’s constituent countries. The analysis further delves into examining the progress, results and the wider ramifications of prominent OBOR projects.

Please click here to view the full report.

By CGCC Vision

Spring is not only the best time to make a year’s planning, it is also when the “Two Sessions” were held. The development of China raises concerns worldwide. The annual sessions are now an important window for the world to get a glimpse into China. This year, they also symbolize the beginning of the “13th Five-year” Plan. Taking a good look into its contents could help Hong Kong companies gain an early advantage.

Dou Shuhua: consensus favorable to the construction of a moderately prosperous society

Deputy Secretary-General of the NPC Standing Committee Dou Shuhua praises the recently concluded sessions highly, citing that they have made good preparation for the work of 2016, which would help bring the wisdom and strength of the people together.

Outstanding accomplishments achieved

Dou pointed out two main influences that the sessions have on the country and the public. First of all, they established common objectives for the country and promote democratic ideas. Secondly, they are the window to China’s image and help foreign countries gain a comprehensive understanding about China.

First Charity Law demonstrates significance

Dou also talked about the Charity Law, which he considered an important law to drive the development of the charity sector in China. It connects the country’s charitable and poverty alleviation work, and goes deep into helping the poor through charitable efforts. Considering the actual needs of China and benchmarking global experiences, the Charity Law is the first law to govern China’s charity sector and is extremely important to its mechanism and system. Last but not least, the Law also provides reliable legal protection to the development of China’s charitable industry.

Chang Rongjun: CPPCC must actively offer strategic advice and participate in policy discussion

Deputy Secretary-General of CPPCC Chang Rongjun stressed that since the government has been valuing highly of CPPCC members’ opinions, and committee members have confidence on the government’s work, all members have shown much enthusiasm in policy discussion during the sessions.

Quality, constructive proposals

Chang thought that China’s confidence in economic development has come from a comprehensive reform and efforts from every direction have to be converged. He praised the rather high quality of proposals put forward during the current “Two Sessions”.

Resolving responsibility issues from their roots

Regarding how CPPCC should play its role in putting strategic advices forward and in policy discussion, as well as how members perform their duties actively, Chang reckoned that relevant issues must be resolved from their roots, which is why he suggested the tactic called “1420”.

Hong Kong and Macau must grasp the opportunities

Chang quoted the comments of some Hong Kong and Macau committee members, who said the “13th Five-year” Plan has offered invaluable opportunities for the future development of the two locations. Hong Kong and Macau must put their own competitive edges to full play and actively take part in the “13th Five-year” Plan and the implementation of “One Belt and One Road” initiative, playing the role of “super connector” between the Mainland and the international markets.

Lastly, he commented the sessions must act as a bridge and help achieve consensus among divergences. He also quoted Yu Zhengsheng, Chairman of CPPCC, pointing out that the community of CPPCC members should actively participate in the realization of a moderately prosperous society, doing its best to demonstrate to the public that members always put the public first and are right next to them.

Liu Shijin: reforming supply side; focusing on reducing production capacity

Many people are keen to know which direction the future of the Chinese economy would go under the “13th Five-year” Plan. Former Deputy Director of State Council Development Research Center Liu Shijin believed that China’s economy is still facing rather strong downward pressure at the moment.

The research of Liu shows that, after a long period of economic growth, when the per capita GDP reaches 11,000 international dollars, slowdown in economic growth happens without exception. As such, he deduced that China would also follow the trend and turned from high-speed growth to medium-speed growth around 2013. The deduction has now become the “new constant”.

Unsynchronized supply and demand resulted in over-capacity

So when will the pace of economic growth hit its rock bottom? Liu thought that from the demand side, the Chinese economy is basically stable, and a more accurate estimation is the second half of this year till the first half of the next. On the supply side, export and real estate are both recording negative growth, but industries such as construction materials, steel and petrochemicals are not slowing down as quickly, resulting in serious over-capacity.

Liu commented that the solution is to eliminate over-capacity, so that both the PPI and the corresponding profit can bounce back. China will only be able to align its supply and demand, allowing both to reach their lowest point, by achieving so.

Efficiency enhancement most critical

The core to the reform on the supply side is to increase efficiency. Liu pointed out that there is a lack of market-oriented adjustment mechanism in the Mainland. As such, an environment favorable for competition should be created for the market to regulate and to lower prices on its own.

He also suggested that the Mainland should speed up industrial transformation and upgrading; it should also reduce and eliminate different kinds of economic bubbles. He thought that an innovative environment should be nurtured based on a respect on the laws of innovation. The government should not interfere too much, but it must work hard to protect property rights, in particular intellectual property rights.

Growth trend to appear as “big L and small W” after all time low

Liu believed that it would be more likely for the growth trend to take the shape of an “L” after hitting the rock bottom. In other words, the pace of growth will stop going down. However, some smaller fluctuations will take place during this time, which will form a new growth platform in the shape of a big L with small Ws. He estimated that the situation would last for 10 years or longer. Liu stressed that “the reform on the supply side would be a long-term battle. Changes must be made in state-owned businesses, land, tax, finance, social security and government functions in order to obtain actual progress and to lay a strong foundation for quality, effective, undiluted and sustainable growth.”

Wang Tongsan: distinguished progress with emerging conflicts

Academician of Chinese Academy of Social Sciences Wang Tongsan analyzed this year’s Government Work Report and said that the Mainland had achieved the goals set out in the “12th Five-year” Plan in multiple aspects. Yet, there are a number of threats as the country made progress.

Development milestones of the “12th Five-year” Plan

According to Wang, China’s GDP is now twice as much as that of Japan’s and standing strong as the world’s second largest economy. He estimated that China will surpass the US and becomes the world’s number one within 10 years’ time.

Wang pointed out that the “12th Five-year” Plan made significant progress in structural adjustment. The service industry is now the biggest sector in China, while consumer spending is a major drive to support economic growth. The urbanization rate in China is now over 50%, with evident improvement in people’s standard of living.

Decelerating growth

But he pointed out directly that a number of domestic and external issues are gradually surfacing. At present, the global economy is recovering weakly. Wang estimated that the global economic growth of 2015 would not exceed 3%. Growth in international trade is just as lackluster, which poses a great impact to China. Diverging monetary policies among advanced economies have also added many external uncertainties for the country.

At home, Wang saw downward pressure for the economy. The quarter-on-quarter growth for GDP over the past four quarters has been continuously slowing down. Growth in investment was also weak during the past year. Wang was also concerned about the drop in import and export trade volume saying that “Whether it was calculated in RMB or USD, the total volume in both import and export in the Mainland dropped last year.”

Certain companies facing difficulties

Another domestic issue is the diverging trends in the regions and sectors. Wang said that there are obvious differences in the growth of regional GDP. Growth in fixed asset investment in different areas also saw evident variances. New and high-technology industries are growing stronger in the Mainland and they also yield higher profit. Resource industries such as coals and steel, etc. have shown clear profit decline.

The operational difficulties of companies are also reflected on the total profit of state-owned businesses, which fell 6.7% year-on-year in 2015. Compared to the 5.6% decline among central state-owned enterprises, regional ones recorded bigger drops. Wang explained that, economic slowdown led to decelerated growth in the salary guidelines of various locations.

Conflict in fiscal balance

He also pointed out that the National General Public Budget income of last year was 15.2217 trillion dollars, while the expenditure was 17.5768 trillion; the lever effect resulted in a contradicting fiscal balance.
 
Wang saw risks and threats in the Mainland’s financial industry. He said, “Fluctuations in the stock and foreign exchange market are quite obvious. Property prices are also polarized between first-tier cities and other cities, in particular, third and fourth-tier cities. Property prices of first-tier cities are increasing quickly, but third and fourth-tier ones find it rather difficult to destock.” Last year, foreign reserves dropped 13%, that is a few hundreds of billions of US dollars less. The amount shrank more than US$ 100 billion within one month in February alone and that reflects instability.

Lau Siu-kai: Hong Kong’s participation in “One Belt and One Road” an irresistible trend

Vice-President of the Chinese Association of Hong Kong & Macao Studies Lau Siu-kai analyzed the importance of “One Belt and One Road” for Hong Kong. He reckoned that “in the long run, it will be related to the pace, method and direction of Hong Kong’s development in the future; it also connects to Hong Kong’s position, role and function at the national and the international levels.”

Lau pointed out that “One Belt and One Road” is on one hand an active and positive response made by the country to address the changes in the international setting and its own development needs; and on the other, a move to change the prevalent international setting. If it turns out to be successful, significant changes will happen in the international setting and global relations. Under such circumstances, the global importance of Asia will be lifted, and China will become Asia’s most influential country. He also described “One Belt and One Road” as a “westward strategy” that China puts forward in response to the “Rebalancing toward Asia’’ strategy of the US, aiming to further expand and widen strategic space for China.

Hong Kong will rely less on Western economies

Lau analyzed that, if “One Belt and One Road” is successful, Asia will become the center of gravity of the global economy and the locomotive for economic growth. Much of Hong Kong’s progress will come from Asia, in particular, eastern Asia and Southeast Asia. As a result, Hong Kong’s reliance on Western economies will constantly reduce.

Lau added that, with the European-Asian- African free trade zone made possible by “One Belt and One Road”, Hong Kong will gain more new development opportunities, service targets, job opportunities, and more importantly, international position or role. These will help strengthen and develop “one country, two systems”, and will be favorable to tighten the relationship between Hong Kong people and Mainland Chinese.

Hong Kong people should adjust their mindsets according to changes

According to Lau, “Hong Kong people must understand that big changes are taking place in the mainland environment and international setting, and that keeping the existing status is impossible. The past attitude that put little emphasis on Asia and the tendency to over-rely on the West have to be appropriately adjusted and balanced.” He stressed that while “One Belt and One Road” would have limited influence and impact on Hong Kong in the short run, it has long-term connection to whether Hong Kong can continue to develop prosperously, its value to the country, as well as its international standing.

As for the challenges faced by Hong Kong in taking part in the “One Belt and One Road” initiative, Lau reckoned that while “opposing powers’’ and “nativists” have raised their doubts and are setting up hurdles, we must understand that shutting our doors and exclusivism do no good to Hong Kong; they also go against the greater global trend. He suggested that the SAR government and all sectors of the society should work on explaining to the people of Hong Kong about the significance of “one country, two systems” for our territory, as well as to overcome the hindrance created by opponents.

This article was firstly published in the magazine CGCC Vision 2016 May issue. Please click here to view the full article.
(Remark: This is a free translation. For the exact meaning of the article, please refer to the Chinese version.)

Written by Christopher K. Johnson, Senior Adviser and Freeman Chair in China Studies, CSIS

In the fall of 2013, Chinese President Xi Jinping put forward the strategic framework of building the “Silk Road Economic Belt” and a counterpart “21st Century Maritime Silk Road”, collectively referred to in abbreviated form in Chinese parlance as the “One Belt, One Road” (OBOR) initiative. …

As such, the new U.S. administration that takes office in January 2017 would be well served in thinking about new approaches to interact with and manage a process that, if President Xi gets his way, will be a force to be reckoned with for the next decade and beyond.

This report was firstly published by CSIS in March 2016.

Please click here for the full report.