President Xi Jinping first announced Chinas Silk-Road Agenda in April 2013 as a Confucian Initiative to partnership for the furtherance of Peace (alike the European Union). The scope just follows the ancient Silk road revival from the Tan Dynasty almost 200 a.n. up to the time of China’s Great Fleet in the early 15^th century. The initiative shall connect the Asia-Pacific Economic Zone with the European Union. The effectiveness of the Marshall Plan in bringing prosperity through infrastructure buildup as a basis for productivity increases that drove affluence and welfare is China’s benchmark for the BnR Initiative.

Actually there is need for action after China’s rise having fueled economies of the ASEAN countries, where China is also the largest investor. Free Trade Agreements [ #FTA ]  among the original founding members of ASEAN Economic Zone (ID, MY, PH, TH, VN, SG), to secure Singapore a hinterland, yet poorer BN, MM, LA, KH joined before the +3 (CN, KR, JP) and associates (HK, MO, TW, TL) entered into the ASEAN+3. Today 400 of 600 FTA negotiations have already been executed. However with consequences in the economic balances’ divergences. Therefore China intends to help smoothen out disequilibria in infrastructure among the ASEAN-plus members to mitigate long term instabilities. After China having evolved from the world’s biggest factory to the World’s biggest market, it has to deal with out-migration of industries into ASEAN countries as well as overcapacities in certain infrastructure manufacturing sectors. Having chosen the Pakistan Corridor as a first priority in roll-out, China’s West can rise into the center of economic developments.

Among ASEAN-plus the RMB has increasingly become a common clearing currency. However, in the course of rolling out 200 “node-cities” whereof only 57 shall be in China, Infrastructure Investments are intended to gradually switch into RMB financing, to avoid foreign currency exchange risks once China’s foreign reserve savings will be invested. Such “node-cities” shall follow the examples of Chinas 4 plus 14 special economic zones’ development and possess a minimum economic structure of a Financial Service Sector, Logistic Industry, ITC Services Industry (supporting cyberification of education) and Science & Technology facilities and associate services (IP, licensing, etc.). The second largest field for infrastructure investments will be connecting the “node-cities” through 2,000miles new railways also linking-in 100 new harbors.

For example Indonesia consists of 17,000 islands and spends about 23% of its GDP on logistics, not to mention the impossibilities in bringing electricity to all. The Philippines have 7,000 islands and lack capacity for building the infrastructures they need, to give just two examples. For the seed financing China allocated U$ 40bln to the BnR-Fund and initiated the Asian Infrastructure Investment Bank formed by 37 regional and 20 external participating countries bringing U$ 100bln equity into it. Further regional National Development Banks and International Finance Institutions would provide another U$ 100bln leverage at preferential terms to facilitate approximately 1.5 times this volume in commercial loans or bonds.

Hong Kong has been nominated by the Chinese government to handle RMB-bond emissions for international investors and service the liquidity for venture financing by its “red-chips” market. To compensate for lack of available talents China has already demonstrated in Qianhai the provision of tax benefits for individuals of certain qualifications from zero to long term tax ceilings at 15%. Qianhai built a GDP of RMB 115bln employing 3.5mln high level jobs from its opening 2 years after decision within 4 years.

#SilkRoad, #Belt&Road, #ASEAN, #WestChina