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Opening Up New Trade Corridors

• China’s Belt and Road Initiative will connect and stimulate economic activity across more than 65 countries
• As incomes rise for Asia’s middle classes and discretionary spending increases, demand for both low-cost value-added manufacturing goods as well as higher-end items will go up
• Expanding trade corridors – both physically and digitally – will make it easier for large multinationals as well as SMEs and young entrepreneurs to reach new consumers and markets

The Belt and Road Initiative1 (BRI) is a long-term, geographically diverse strategy that will connect cities in more than 65 countries along two primary trade routes. The Silk Road Economic Belt recreates the ancient land-based trading routes that linked Europe and the Middle East to China through Central Asia. The 21st Century Maritime Silk Road is a sea-based route to the south that connects China, South East Asia, India and Africa. Each will create three economic corridors, and major infrastructure projects are already underway to support the initiative.

One of the corridors along the maritime Silk Road, for instance, is the Bangladesh-China-India-Myanmar Economic Corridor, which joins China and South Asia. Historically, travelling from Dhaka, Bangladesh to the South, even just 70 or 100 kilometres, has taken as much as 14 or 15 hours. Work began in August 2016 on the Padma Bridge in Bangladesh, which will connect Dhaka with the 21 districts in southern Bangladesh – helping reduce travel time2. This kind of improvement and further development along the Belt and Road will increase productivity and efficiency in the supply chain, making trade easier between Asia, Europe and Africa.

According to Peter Wong, Deputy Chairman and Chief Executive for the Hong Kong and Shanghai Banking Corporation Limited, the initiative is more than just a conceptual framework; it is a well-planned, well-thought-through scheme with long-term goals. In addition to expanding the scope of traditional trade, new trade services and cross-border e-commerce solutions are likely to emerge. As a result, China estimates that opening corridors and growing digital economies will put annual trade along the Belt and Road over USD2.5 trillion3 in the next decade, up from about USD1 trillion in 2015.

The Impact on the Rising Middle Classes

The initiative has already created approximately 160,000 jobs4. This includes traditional infrastructure projects on ports, roads and railways that are bringing work to people in BRI countries. Plus, over 50 industrial cooperation zones are being built along the routes5, which will lead to in additional opportunities in manufacturing, finance, professional services and more.

With access to more and better-paying jobs, nearly two-thirds of the world’s growing middle classes are expected to live in Asia6 and along the Belt and Road in the coming decades. As incomes rise and discretionary spending increases, the demand for both low-value manufactured products and higher-end goods and services will go up as well.

By rebuilding the trade and capital flows across Asia and China that existed before Columbus discovered America, BRI will make it easier and more cost-effective for businesses around the world to reach these new markets. Consumers will also have access to better technology and new brands.  For example, by improving land and maritime routes, German cars, computers or chemicals can now make the 8,500-kilometre journey to China’s eastern seaboard by direct rail – faster than sea and cheaper than air. Similarly, fruit producers in the Philippines will be able to ship to one of the Chinese ports and transport goods by rail into central Asia in a far shorter timeframe compared to their historic route into Europe and then over road and rail eastward7.

SMEs, Micro-enterprises and Young Entrepreneurs

BRI will not only open up new markets for existing companies; it will create opportunities for SMEs and young entrepreneurs as well. Dr Victor Fung, Group Chairman for the Fung Group, believes that as the initiative gains momentum, the number of SMEs and micro-enterprises will rise substantially, and these businesses will become key players in the global supply chain. Their operations – ranging from categorisation and sourcing, to retail and logistics, among others – will be different from the traditional supply chain model in Europe and the US, creating new challenges for supply chain managers8.

The result will likely be the development of new trading platforms, business models and distribution channels that don’t rely on significant land or resources. Alibaba, for instance, announced in March that it would establish an e-commerce hub in Malaysia to support BRI. The hub – which will be part of the country’s Digital Free Trade Zone – is designed specifically to help small businesses export goods. Alibaba will also focus on other countries and regions with small businesses and aims to grow their digital economies9. This gives young entrepreneurs the opportunity to set up shops or adopt an online-to-offline business model that will drive sales through online channels, targeting emerging middle-class consumers in countries along the Belt and Road”10.

1 Links to Overview Article
2 “Key engineering projects under the B&R Initiative,” Li Yang, Belt and Road Portal, 9 May 2017
3 “China Eyes 2.5tln USD Annual Trade Volume with Belt and Road Countries,” Xinhuanet, March 29, 2015
4 “Belt and Road Initiative – idea from China but belongs to whole world,” China Daily, 17 March 2017
5 “How ‘Belt and Road’ is boosting global economy, The State Council: The People’s Republic of China, 10 January 2017,
6 HSBC Global Insights
7 “Belt and Road: China’s grand gambit,” p.19 Week in China, Winter 2016
8 Business Talks: New Silk Road – Issued by The Hongkong and Shanghai Banking Corporation Limited, Produced by the Hong Kong Economic Times
9 “Alibaba’s new Malaysia hub a ‘private initiative’ to support One Belt, One Road,” Billy Toh, The Edge Financial Daily, March 24, 2017
10 Ibid.

The initiative is more than just a conceptual framework; it is a well-planned, well-thought-through scheme with long-term goals.

Peter Wong, Deputy Chairman and Chief Executive for the Hongkong and Shanghai Banking Corporation Limited

Belt and Road Trade Routes

The Silk Road Economic Belt, the ancient Silk Road land-based trading routes that connected Europe and the Middle East to China via Central Asia, will create three corridors including:

• The New Eurasia Land Bridge Economic Corridor, linking Jiangsu province through Xinjiang to Rotterdam in Holland

• The China-Mongolia-Russia Economic Corridor, connecting China to Russia via Inner Mongolia

• The China-Central Asia-West Asia Economic Corridor, running from Xinjiang to the Arabian Peninsula, Turkey and Iran

The 21st Century Maritime Silk Road, a maritime route to the south that connects China, South East Asia, India and Africa, will create the other three corridors:

• The China Indochina Peninsula Economic Corridor, joining the Pearl River Delta with the Southeast Asian countries

• The China Pakistan Economic Corridor, connecting Kashgar in Xinjiang with the deep-sea port of Gwadar in Pakistan

• The Bangladesh-China-India-Myanmar Economic Corridor, bridging China and South Asia

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