19 AUG 2019

Deloitte and the Shanghai Municipal Commission of Commerce (SMCC) jointly issued the second Belt and Road Countries Investment Index Report earlier this month indicating that the overall investment attractiveness of Belt and Road Initiative (BRI) countries has risen, particularly in Southeast Asia.

2018 marked the fifth year of the Belt and Road Initiative, and by the end of 2018, China had signed BRI cooperation agreements with 122 countries and 29 international organizations. The report notes that China also launched a series of policies and measures to further open up its economy in 2018, including:

  • 17 trade agreements with 25 countries and regions, with ongoing negotiations on new trade agreements with 28 countries;
    • four customs duty reductions lowering overall tax rate from 9.8 to 7.5 percent;
    • 23 policies and measures to attract foreign investment;
    • 35 cross-border e-commerce pilot zones and the extension of zones into inland areas;
    • 28 cooperation zones in 24 BRI countries, with total investment reaching $29 billion and creating more than $2 billion for local governments.

China has stepped up infrastructure investment in developing countries, including by improving transport and logistics infrastructure in Vietnam, the Philippines, South Africa and Kenya. China has also become more active in facilitating key industries in BRI countries, including:

  • Establishing 23 international joint agricultural experiment platforms;
    • Establishing industrial parks in Belarus, the Philippines, Serbia and Ethiopia;
    • Joining with other countries to create the Initiative on Belt and Road Digital Economy Cooperation which focuses on the connectivity and development of digital infrastructure
    • Signing the Belt and Road Energy Partnership Declaration with 17 countries including Algeria, Azerbaijan, Afghanistan and Bolivia, to enhance international cooperation and development in the energy sector.

Apart from traditional industries such as power, oil and petrochemicals, and transportation construction, the report indicates that the investment focus of Chinese enterprises will extend to sectors including leasing and business services, financial services, wholesale and retail, and new and high technology. Meanwhile, regional differences in investment in BRI countries will gradually emerge with increasing investment in key countries and sectors.

China’s non-financial investment in BRI countries increased by nine percent, and trade volume was up 13 percent from 2017. Four diplomatic events hosted in China expanded the BRI’s influence on the international stage, and China has played an increasingly important role in facilitating BRI countries’ economic development, says Deloitte Global Belt & Road Initiative Leader and Deloitte China Vice Chairman Derek Lai.

“In 2018, Chinese investors facilitated transportation and logistics infrastructure development, fostering key local industries including agriculture, industrial parks, information technology and energy. Among the BRI destinations, most of the 20 countries with the highest investment attractiveness are in Southeast Asia and the Middle East. Singapore and India show high growth potential. Nevertheless, companies need to be aware of increasing political and foreign exchange risks, as well as heightened political risk in Middle Eastern countries as a result of security threats such as war and terrorism.”

Data for the report was collected widely from internationally recognized sources including the World Bank, International Monetary Fund, Moody’s and the Ministry of Commerce of the People’s Republic of China.

The report is available here.

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