ICBC Standard Bank launches Belt and Road economic indices

ICBC Standard Bank, in partnership with Oxford Economics, has launched two Belt and Road economic indices, designed to capture the dynamics as well as broader economic benefits of the Belt Road initiative.

ICBC say their Belt and Road indices have been created to address the lack of an existing standardized framework for comparing the Belt and Road countries, bridging the informational gap for investors.

The two indices are:
• The ICBCS Belt and Road Economic Health Index – a monthly index designed to provide a broad overview of the relative attractiveness across each of the Belt Road economies. It provides over 45 individual country indicators within a comparable analytical framework that can be used for tailored analysis, helping investors to make informed decisions. At the high-level, overall economic health is tracked across the dimensions of macroeconomic performance and risk outlook.

• The ICBCS Belt and Road China Connectivity Index – a semi-annual index designed to provide investors, businesses, policymakers and other stakeholders with an evidence based metric to track broad-based economic connectivity between China and the Belt and Road economies. This is achieved by tracking bilateral activity across the three dimensions of trade, capital and people.

ICBCS say they are uniquely positioned to provide this analysis, given their experience and focus on frontier and emerging markets. The Belt Road initiative has led to a vast mobilization of resources to over 60 frontier and emerging economies.

“Originated in China, the Belt and Road initiative has already delivered and will continue to generate broader economic benefits well beyond its neighbours,” says Liu Xiaoming, China’s UK ambassador. “This China-UK based cooperation sheds new lights on thought leadership establishment in this endeavour, and will offer unique and meaningful contributions to future policy debates and dialogues in the coming years.”

Findings of the inaugural reports:
The inaugural ICBCS Belt and Road Economic Health Index (EHI) found that:
• Despite sovereign and external risk at multi-year highs, economic health is at a decade high driven by an impressive improvement in market fundamentals.
• The top macro-performers fall into two categories:
• The Big 3 (China, India, Vietnam) – large emerging markets with strong growth prospects;
• The Nimble 4 (Qatar, Singapore, Estonia and UAE) – smaller markets with good quality investment climates.
• Central and Eastern Europe (CEE) currently enjoys the highest average economic health score across the Belt and Road regions, with the Middle East and North Africa region lagging towards the bottom due to a prolonged period of low oil prices and recent geopolitical tension.

The inaugural ICBCS Belt and Road China Connectivity Index (CCI) found that:
• Overall economic connectivity between China and the median Belt and Road economy is around twice as deep in 2015 as it was in 2005.
• As China’s economic activity shifted to trade in services and human capital, connectivity has become less tied by proximity.
• Top risers of the index are dominated by countries in the CEE region, reflecting China’s structural shift to rebalance towards more sophisticated economies.
• As China shifts to become a more consumer-driven economy, the role of commodities as a driver of economic growth and connectivity has fallen.
• There is clear positive correlation between the capacity of an economy to facilitate trade, the strength of its infrastructure and, in turn, between trade and growth.

Jinny Yan, chief economist, China, ICBC Standard Bank says, “As a result of our research we can see a clear link between investment in infrastructure and overall economic prosperity in Belt and Road countries. This explains why infrastructure is a central part of China’s Belt Road effort and why it is so crucial to unlock alternative infrastructure financing to ensure the initiative delivers on its goal of inclusive economic growth.”

Date

5 Jul 2017

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