SINGAPORE - China’s bid to spur growth and expand economic influence beyond Asia by building roads and ports under the Belt and Road initiative may need a reality check.
Industry experts at The Asset 11th Asian Bond Markets Summit tell participants that while China’s Belt and Road scheme brings plenty of investment opportunities, those are limited by a number of challenges, foremost is the commercial viability of the projects.
“The real motivation of OBOR (One Belt, One Road) projects is exporting China’s excess capacity,” says Kalai Pillay, senior director and head of North Asia industrials, Fitch Ratings.
“The headline OBOR projects – most of them will not be commercially viable for years to come,” he says, adding that “a sliver of infrastructure financing is commercially viable.”
Abhishek Badkul, executive director, project and export finance at Standard Chartered agrees. “Project finance opportunities continue to be there, but it’s only a small proportion of the whole infrastructure market,” he says.
As China faces a slowdown after years of investment-fuelled growth, the country’s leaders are pinning their hopes OBOR could be the answer to the growing problems at home: a weakening demand for its excess still mills and cement plants, rising joblessness and struggles to deepen its influence regionally and globally.
Panellists at the summit believe China can still reap some of the expected benefits of OBOR, though that may entail giving the plan a repeat review, carefully selecting going forward the projects that will be viable.
The belt and road has the capacity to influence the investment landscape and open new economic corridors in the region that can enhance connectivity. Given the country’s resources, Beijing could successfully move forward with OBOR, though the road to realizing the dream will likely be fraught with obstacles.
To stay up to date with events on the ground please visit our live site by clicking here. Alternatively you can visit our Twitter page @TheAssetMag.
