Belt and Road Initiative of China will contribute US$117 billion to the global trade in the current year
The commodity trade between China and other countries that have pointed out by Belt and Road Initiative is assumed to increase by the US $117 billion during the current year report according to the new analysis.
This indicates that for China US$156 is an additional export, although China is going to import additional goods of worth US$61 from across 80 countries whose names are mentioned in the Chinese government’s official manifesto, Trade credit insurer Euler Hermes researcher reveals.
According to the document it is estimated that 0.3 percent will be added to the global trade and around 0.1 percent will be added to global growth in a movement where fears are increasing about the slowdown within the world economy but most preferably in China.
The belt and Road initiative is the flagship investment programme that is led by the Chinese President Xi Jiping’s which was inaugurated in 2013. The objective of the programme was at creating infrastructure across countries which would be responsible for around 68 percent of the world’s population and could cover 36 percent of the gross domestic product [GDP].
This Beijing’s proposal did not get the acceptance from all the countries; some countries rejected the proposal among them stood India later followed by Malaysia.
Warnings Issued by Pentagon for the Strategy behind Belt and Road Initiative
China funded projects need to be still accepted by others among them remains South Korea although they have conveyed the interest in receiving investment mainly through belt and road program.
Meantime Euler Hermes stated that because of the initiative higher trade volume will be noticed by these nations, even if the nations still need to accept any direct investment from China.
At Euler Hermes, the senior economist Mahamoud Islam in Hong Kong gave a statement saying that this is because of better trade relations between China and trade markets, along with the better result of connectivity and infrastructure across the belt and road network.
Further stated that a large portion of the belt and road plan is domestic, international companies are to be profited from infrastructural development in China as well. Islam stated.
Other countries will be benefited from the demand from China. The politics and the supply chain is controlled by China which can be debated by you. Ultimately at the end of the day, this will help bring more demand to markets and will also bring advantages from that demand.
The demand will enhance competitiveness. That should not be a surprise as you are developing railroads, airports and ports and also connecting countries. Islam mentioned further adding it for China, to push out excess capacity in industries implementing belt and road strategy was a good idea, including industries like coal and steel, by investing in Chinese currency can help the organizations to internationalize and will also help to free the Yuan.
Experts say 2018 was supposed to be Xi’s year. Later Belt and Road were carried out
The trade profits in 2018 were predicted to be more than US%158 billion along with South Korea and Southeast Asian countries like Russia and India. They are going to be the topmost beneficiaries.
To improve the trade, the belt and road initiatives were started, and the plan was mostly supported at the time when it was started in 2013. It appeared as though the old Silk Road trade route that is connecting Eurasia would be restored, As per Euler Hermes prediction it nearly observed US$460 billion were invested between the time 2013 and 2018.
In 2019 the investment remains to increase. The value of the new belt and road project during January 2 to January 15 was at US$4.5 billion reports as per the RWR Advisory Group which is a research house located in Washington while the greater portion of the investment is towards the Sub Sahara Africa.
Although bigger funding package was in Pakistan which gained around US2.21 billion for the project named as Mohmand dam project, the project is supposed to be developed by a joint venture which includes the China Gezhouba Group.
The strategic position of Pakistan has made China’s belt and road plan as on the main focus and has destined to gain more than US$60 billion in debt and equity investment.
Gwadar is at the center of this plan which is a port located on the Arabian Sea. The Gwadar is currently turned into transshipment hub by China which further allows the remote western regions of the Middle East to access the energy markets.
Nevertheless, Pakistan is still one of the most disputable hubs over the network. Most of the analysts say that the debt exposure of Pakistan to China is unjustifiable.
How the world changed its opinion on the belt and road plan of China
In recent months we have seen considerable backlash for the new initiative, Mahathir Mohamad the Malaysian Prime Minister warned last year that a new story of colonialism is originating from China’s departing lending.
According to last year data from the Center for Global Development which is an American think tank suggested that the countries are mostly worried about being caught in a debt trap, incapable of paying the loans and are forced to cede assets like commodities and infrastructure either of it.
The most important concern is that the US$8 trillion initiative will leave countries with huge debts that will block the public investment and also hinder the economic growth basically according to the report.
In December the fears were distributed stating that Mombasa of Kenya the largest port requires relinquishing the control overpaid for by China if in-case Kenya is not able to pay the debt. Uhuru Kenyatta, the Kenyan president, further rejected these claims.
In 2017 in Sri Lanka the government converted the debts that were due by the Chinese funders into equity which allowed for China Merchant’s port of the Hambantota port to take control over by paying the 99-year lease.
On earth, China is the largest foreign exchange reserve. While the money remains in the bank, China seems to get 3 percent in return. The incentive will help the excess liquidity to progress for China. By making investments in equity and through debts they are trying to gain good economic returns Bradley parks the executive director of AidData mentioned who is a research center working at College of William and Mary located in Virginia.
Outbound Project of China falls; investors are drawn away from the US
The indication that China is making use of its new belt and road initiative which is making its foreign reserves to work has helped to change the mood towards Xi’s flagship program in recent days.
Complete Intelligence CEO Tony Nash who is a research firm believed that the initial promises of the belt and road plan were held while now they specify it as a missed opportunity.
Nash further mentioned that in many cases the risk is underestimated by China especially about the projects that have been funded, a further statement about the problems that are faced by Indonesia for the best Known project of a railway linking Jakarta and Bandung which is estimated to US$6 billion. The project has faced many problems which include problems related to land procurement.