China’s OBOR initiative can help to improve sustainable economic growth for inland China through improved infrastructure connectivity, reducing the marginal transaction cost of exported goods.
This is a response to some of the urban strains resulting from rapid economic growth along the eastern seaboard covering major economic areas, the Bohai Rim and Yangtze and Pearl River Deltas, which still account for the majority of China’s GDP and trade.
Financial and Professional Services
The UK’s financial and professional services sector is ideally placed to meet the demand which will be generated by the OBOR initiative.
Ventures along the routes will require a lot of financing to fund infrastructure projects, as well as a range of advisory services to support their development, for example, while legal companies will find opportunities to advise on PPP projects. We also anticipate significant M&A activities.
Opportunities will exist to partner with the Silk Road Fund and Asian Infrastructure Investment Bank (AIIB).
OBOR will stimulate agricultural cooperation within China and between neighbouring countries. China is seeking to build a global food supply chain to meet its rising domestic demand for food, particularly protein.
Domestically, China is trying to increase agricultural productivity and traceability, and is changing from an individual farming model to one of cooperatives, which will increase demand for agricultural machinery.
There are numerous opportunities for cooperation in western areas such as Xinjiang, Ningxia, Shaanxi and Gansu, which have abundant agricultural resources but lack advanced agricultural technology and management skills, and whose agricultural productivity and efficiency is comparatively low.
The UK’s expertise in farm management, processing and storage of agricultural products, precision farming, plant protection and variety introduction, can help local companies improve agricultural efficiency in areas from supply chain management to farming mechanisms.
China would gain from technology transfer from the UK, as well as imported machinery, storage management expertise and food processing techniques.
Advanced Manufacturing and Transport
China is seeking to accelerate its transition from traditional manufacturing to a more innovative and advanced model so as to reposition itself in the global supply chain. “Made in China 2025” strategy - on which CBBC will soon publish a further report - sets out China’s ambitions in this area.
Companies in sectors such as high-tech shipbuilding, new information technology, numerical control technology, aerospace equipment, new materials and energy- saving technology are expected to benefit from investment, initially to ensure that products are good enough to be exported to other OBOR countries, and then with a view to making Chinese goods competitive worldwide.
Energy and Resources
China is forecast to account for the greatest global increment demand for oil over the next 20 years. Growth in demand from China is projected to increase by 2 million barrels per day (mb/d) by 2025. Growth volumes, however, are slowing relative to past years.
By 2016, China is likely to surpass the US as the world’s largest oil importer, with import requirements projected to more than double from today’s levels to almost 14 mb/d by 2035.
China’s offshore reserves are in marginal fields, requiring deep-water surveying, more sophisticated geological modelling and the expertise to drill in high-pressure and high-temperature environments.
This growing trend aligns with UK expertise in North Sea exploration and production. As China moves further to develop its reserves, we anticipate more opportunities for the UK.
Chinese state-owned national oil companies started investing in production assets outside China in 1993. Since 2008, they have rapidly expanded upstream M&A.
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