Global Opportunities for Growth with the China Belt and Road Initiative
The China Belt and Road Initiative recently hosted its second forum. Over 5,000 delegates from over 150 countries, including the leaders of 37 nations, attended the forum held in Beijing in April 2019. The infrastructure project began in 2013 as a way to rebuild several historical trading routes across Europe and Asia that had been lost over the years, previously known as the “Silk Road.” The road was basically a widespread network of routes that connected China to other nations in the Far East, Middle East, and Europe. The Han Dynasty opened trade with the West along these routes in 130 B.C. However, the routes were closed over 600 years ago when the Ottoman Empire boycotted trade with China.
China’s New Silk Road Created by the China Belt and Road Initiative
China’s “New Silk Road” is a signature project for President Xi Jinpeng. The project is officially known as the “One Belt, One Road” (OBOR) initiative. In addition to large infrastructure projects across the region, the hope is that trade along these routes will increase. China is looking for a global resurgence in a push to expand the country’s international influence. Some initiatives preceded the OBOR, such as China’s flagship economic corridor development with Pakistan. China is seeking to become the center of global economic activity, with all of the power and influence this status will bring. Additional benefits of the China Belt and Road Initiative include:
- Opportunities to absorb China’s current excess industrial capacity
- Access to new capital for large state firms that already carry a significant amount of debt
- State banks avert any financial crises arising from large state firm’s non-performing loans
- Larger State Owned Enterprises gain pathways to develop into internationally competitive firms
International Cooperation for the China Belt and Road Initiative
China has been developing strong international ties with nations critical to the success of its Belt and Road Initiative. China’s success is clearly seen in its interactions with the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NBD) for BRICS nations. In fact, China has long been considered one of the top emerging international markets. With the NDB headquarters in Shanghai, China’s influential role as a financial center among the BRICS nations is a certainty. BRICS nations include:
- South Africa
Increasing Imports from Nations Participating in the China Belt and Road Initiative
At the April forum, President Xi Jinping chose to address criticism of the China Belt and Road Initiative by publicly supporting several trade-oriented policies and frameworks. Specifically, China will:
- Focus on the highest quality and sustainability for projects undertaken by the China Belt and Road Initiative
- Increase its imports from developing countries to spur investment in those nations
- Reduce existing barriers to trade to further open China’s markets to international imports
- Implement structural changes to promote foreign investment in China
President Xi Jinping’s message on trade included a focus on implementation of trade and international agreements. While agreements can easily be made, implementation has been challenging without a sustained commitment from China to ensure full follow-through. As a result, such issues can be extremely difficult to understand and resolve, including:
- Protection for other nation’s and industry’s intellectual property
- Manufacturing and trade secrets
- Required technology transfers
- Direct and unhindered access to helpful financial resources
- Manipulation of currencies that warp the effects of trade agreements
What Does the China Belt and Road Initiative Mean for Employers?
Employers in nations where the China Belt and Road Initiative projects are in planning stages may be able to leverage opportunities to participate directly or indirectly in various parts of the initiative. Although China’s focus is for its State Owned Enterprises to benefit from these projects, local firms in the countries will benefit as the projects come to fruition. The benefit may arise through direct investment in project-related activities. Alternatively, it may arise through increased trade resulting from the China Belt and Road Initiative.
What should Employers do?
Employers currently located in countries where China Belt and Road Initiative projects are planned or underway should investigate opportunities where they might be able to participate. They should also review future production plans that might need adjustment for potential increased trade opportunities with China.
Employers should review their talent acquisition and management programs to ensure they remain competitive to attract and retain new hires and transferees. Some countries may face talent shortages, so employers should look into global relocation as a solution to find and hire qualified employees. Relocation Management Companies (RMCs) can provide expert assistance to employers to benchmark their relocation policies and add enhancements that attract talent.
Employers not currently located in countries participating in the China Belt and Road Initiative might consider these countries as a strategic location for future corporate expansion. The services of an International Professional Employer Organization (PEO) may be useful to help an employer enter these countries and quickly test the local market.
GMS’ team of global relocation experts has helped thousands of our clients develop relocation programs that attract and retain qualified employees to various destinations. Our team can help your company determine how to attract and retain new hires needed to leverage opportunities arising from the China Belt and Road Initiative.
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Learn best practices from Global Mobility Solutions, the relocation industry and technology experts. Contact our experts online to discuss your company’s relocation program needs in countries that benefit from the China Belt and Road Initiative, or call us at 800.617.1904 or 480.922.0700 today.