Skip to main content

How Can Chinese Companies Benefit From the Belt & Road Initiative?

in World Economy News09/05/2019

China’s US$8 trillion Belt & Road Initiative (BRI) plans to invest in infrastructure around the world, aiming to create new trade routes along the lines of the ancient Silk Road. This route famously crisscrossed all of Eurasia and reached from China all the way into the Middle East and even Eastern Europe.

Leading the cause today are some of China’s largest state-owned enterprises (SOEs), which are investing in roads, railways, ports, and other infrastructure assets around the world to facilitate a resurgence in trade. In the long term, the end beneficiaries will also come to include China’s massive numbers of exporters, who are looking for new markets to sell apparel, electronics, and home appliances.

Let’s dig a little deeper and see how investors can profit from this massive initiative.

Belt & Road will create new markets for China
China’s BRI is partly motivated by a need to offload excess capacity in its own economy and create job growth for its large population. The initiative encompasses 65 countries and 60% of the world’s population, and will create new export markets for Chinese companies.

China currently suffers from severe overcapacity in key natural-resources and building-materials sectors such as steel and cement, stemming from over-investment in the years following the global financial crisis. China will also create new markets for its private sector, particularly exporters of textiles and light manufacturing products.

Another motive is natural resources. For example, China is building railroads in Pakistan to transport oil from the Middle East to its Western regions. China Merchants Port’s (SEHK: 144) new port in Hambonota, Sri Lanka, is also designed to host oil tankers traveling from the Middle East and to China. Kenya’s new railroads will help connect China with natural resources found in landlocked African countries like Uganda, South Sudan, Rwanda, and Burundi.

Thus far, 89% of BRI projects have been implemented by Chinese companies. Right now, primarily SOEs are benefiting from the construction and infrastructure projects, but hopes are that over time, China’s exporters of small goods and appliances will gain from them as well.

Chinese exporters to benefit from the BRI
Many of the end beneficiaries of the BRI will be Chinese exporters. Haier Electronics Group (NASDAQOTH: HRELF) , one of China’s largest producers of refrigerators, air conditioners, and other white goods appliances, is a perfect example.

Over the last two decades, Haier has been expanding its operations overseas, having built eight industrial parks and 24 manufacturing plants across 18 different countries. Six of their industrial parks are in Belt & Road countries such as Vietnam, Indonesia, Pakistan, Thailand, and Russia. And in 2018, Haier generated RMB 10.1 billion in revenues from South Asia, Southeast Asia, and the Middle East.

But Haier faced a crucial issue in Pakistan, a market it had entered in the year 2000. Pakistan’s major cities regularly suffer crippling bouts of rolling electricity blackouts. Over 140 million Pakistani citizens have less than 12 hours of electricity access a day. It is estimated that the country’s chronic power shortages are responsible for a 7% annual loss in GDP.

Yet over the last few years, the first wave of US$62 billion in Belt & Road capital has started to pour into Pakistani infrastructure projects. Two-thirds of this capital is dedicated to energy projects such as coal power plants, to alleviate the country’s frequent power outages. Since 2014, the country’s installed electricity generation capacity has increased from 23 megawatts to nearly 34 megawatts, improving conditions across the country.

As a company that produces and sells white goods appliances such as microwaves, refrigerators, and washing machines to middle-class households, this is undoubtedly a major boon for Haier. Today Haier has a whopping 32% share of the home appliances market in Pakistan and boasts a distribution network of 3,000 dealerships and retail stores. In 2018, Haier’s Pakistan revenues grew 21.7% in 2018, and the outlook for the company’s fortunes in the country remains strong.

Belt & Road to continue making inroads
As the Belt & Road Initiative begins to make its mark on the rest of the world, investors should keep an eye out to see who will benefit the most. While China’s SOEs may capture the headlines with Belt & Road infrastructure assets, China’s private exporters (that tend to fly under the radar) could enjoy even greater rewards in the long term.
Source: Motley Fool


Popular posts from this blog

SSG Commando Muddassir Iqbal of Pakistan Army

“ Commando Muddassir Iqbal was part of the team who conducted Army Public School operation on 16 December 2014. In this video he reveals that he along with other commandos was ordered to kill the innocent children inside school, when asked why should they kill children after killing all the terrorist he was told that it would be a chance to defame Taliban and get nation on the side. He and all other commandos killed children and later Taliban was blamed.
Muddassir Iqbal has deserted the military and now he is  with mujahedeen somewhere in AF PAK border area”
For authenticity of  this tape journalists can easy reach to his home town to interview his family members or   ISPR as he reveals his army service number”
Asalam o Alaikum: My name is Muddassir Iqbal. My father’s name is Naimat Ali. I belong to Sialkot divison (Punjab province), my village is Shamsher Poor and district, tehsil and post office  Narowal. Unfortunately I was working in Pakistan army. I feel embarrassed to tell you …

CPEC Jobs in Pakistan, salary details

JOBS...نوکریاں چائنہ کمپنی میںPlease help the deserving persons...Salary:Salary package in China–Pakistan Economic Corridor (CPEC) in these 300,000 jobs shall be on daily wages. The details of the daily wages are as follows;Welder: Rs. 1,700 dailyHeavy Duty Driver: Rs. 1,700 dailyMason: Rs. 1,500 dailyHelper: Rs. 850 dailyElectrician: Rs. 1,700 dailySurveyor: Rs. 2,500 dailySecurity Guard: Rs. 1,600 dailyBulldozer operator: Rs. 2,200 dailyConcrete mixer machine operator: Rs. 2,000 dailyRoller operator: Rs. 2,000 dailySteel fixer: Rs. 2,200 dailyIron Shuttering fixer: Rs. 1,800 dailyAccount clerk: Rs. 2,200 dailyCarpenter: Rs. 1,700 dailyLight duty driver: Rs. 1,700 dailyLabour: Rs. 900 dailyPara Engine mechanic: Rs. 1,700 dailyPipe fitter: Rs. 1,700 dailyStorekeeper: Rs. 1,700 dailyOffice boy: Rs. 1,200 dailyExcavator operator: Rs. 2,200 dailyShovel operator: Rs. 2,200 dailyComputer operator: Rs. 2,200 dailySecurity Supervisor: Rs. 2,200 dailyCook for Chinese food: Rs. 2,000 dailyCook…

Historical relationship between Kurd and Baloch.

The Kurds are the ethnical group living in a region known as Kurdistan which is divided into Iraq, Syria, Turkey and Iran. They  are struggling for an independent region since decades and they are famous for their female guerrilla fighters.        On 25 September 2017, the referendum for an independent Kurdish region  was held in Iraq with a turn out of 72 %.   On this important occasion, the historical relation between Kurd and Baloch people is worth discussing.       When it comes to history, every nation tends to find its roots and origin. Same goes with the Baloch people. The Baloch people are always curious  about  finding their roots in history. Even if you  talk to a shepherd in Balochistan, he will be curious to talk about his  tribal or ethnical roots.      The Balochs have always conveyed the history to the next generations in different mediums like poems etc. No Baloch before 20th century had written books on  history  or origin of the Baloch nation .