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Larger Infrastructure Maneuvering — the New World Order

I thought that I should pen down my piece which has got bigger macro impact globally. I have been following the Chinese economy since 2001 when many western media houses were not even bothered to talk about it. The investment of Belt and Road is perhaps one of the biggest economic and infrastructure strategies after the Marshall Plan of the post-World War 2 era. The economic roadmap would change dramatically for a few countries, ushering in prosperity and progression. The OBOR summit in Beijing, China on 14-15 May 2017 had gathered leaders from over 30 countries attending the event. China has high expectations for this event, calling it “a big play” and “one of the most important events” in 2017. The OBOR equation is in the limelight now as this investment will bring connectivity and closer trade routes with many countries.

Why China Needs Belt and Road Strategy — a Deep Insight

Geography is an important subject to master. China is landlocked from 3 sides, i.e. North, South, and West. China has access to sea route only from the East. She is managing her eastern corridor very well since 95% of the Chinese population lives on that east. All the sea trades, or maneuvering in waters, are done from the eastern side. Straits, sea route, and ports have got huge significance in the economic structure of the country. China is fully benefiting from all the sea route, trade links and straits where she gets her resources with utmost perfect and ease.

 

Oil is the Name of the Game — Economic Trajectory

Everyone country needs 3 things to keep the growth momentum going:

  1. Oil
  2. Money
  3. Labour

China needs two countries for her growth trajectory to move forward. Firstly, it is Malaysia, due to its Straits of Malacca; and secondly, it is Pakistan because of Gwadar Port. Both countries hold significant geographical value for the Chinese. China will never leave Malaysia and Pakistan for the next 100 years. The new world order is: Whoever controls the commodities and ports, will control the global economy. Power is moving from west to east. China is the next global and economic powerhouse for the next 50 to 100 years.

Total Investment from OBOR: $1.4 Trillion in 10 Years

Total investment in Belt and Road strategy is tantamount to $1.4 trillion in the next 10 to 15 years which is 12 times bigger than Marshall Plan for Europe in 1952. Europe was devastated after WW2. It was only because of Marshall Plan that Europe got back on her feet. UK and Germany were the main recipients of the aid to Europe recovery from the brink of dilapidation.

Relevant Countries Benefiting From OBOR 

The major countries that would receive huge benefits from the Chinese investments, with their respective stakes highlighted:

1. Indonesia——–Strategic location2. Philippines——South China Sea

3. Malaysia ——–Straits of Malacca

4. Russia————Oil and Gas

5. Iran—————Straits of Hormuz

6. Pakistan———-Gwadar Port

7. Egypt ————Suez Canal

8. Djibouti ———Strait of Bab Al Mandab

9. Turkey ———-Port of Izmir

Source: Credit Suisse

Macro View of The OBOR Scope

This strategic initiative will cover the following at the bigger scale with major railways, ports, and highways development in the partnering countries. At this stage, the biggest beneficiaries could be mid-cap Chinese construction, construction machinery companies, real estate, logistics and infrastructure companies in Asian countries with large exposure to Chinese investment.

The OBOR Outlook

The magnitude of OBOR would reach and make an impact on a colossal scale, as represented by the equation of:

65 COUNTRIES / 4.4 BILLION POPULATION / 33% GLOBAL GDP

Source: HSBC, Economist magazine, Bloomberg, CNBC

Final Thoughts

China is on the move with a bigger and smarter investment that will benefit all partner countries in the long run. She would change the economic destiny of many countries in the OBOR equation. Sit back, relax and witness the chess moves from the Chinese Leadership. Stay ahead of the game with IQI Global.

About the author

Shan Saeed is a Chief Economist at IQI Global, a leading property and investment company operating and advising clients in Kuala Lumpur, Singapore, Hong Kong, Toronto, London, Manila, Melbourne, and Dubai. He has 16 years of solid financial market experience in the areas of private banking, risk/compliance management, commodity investments, the global economy and business strategy.

This article was first published on MoneyCompass.


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