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The New Silk Road: China’s Economic Priorities Become Official

by | Aug 19, 2017

This article originally appeared at Anti-Media.


On Friday, the government of China made it officially clear to Chinese companies that overseas investments in projects linked to the “One Belt, One Road” initiative will take priority going forward.

“Profound changes are taking place in international and domestic situations, and Chinese enterprises face not just relatively good opportunities but also various risks and challenges in overseas investments,” the State Council wrote in its introduction of the new rules.

The Belt and Road Initiative, unveiled in 2013, is China’s grand plan to link over 6o countries across Asia, Africa, the Middle East and Europe through infrastructure such as roads, railways and ports.

The guidelines, according to the government, are meant to “promote the continuous and orderly and healthy development of overseas investment” in Belt and Road-linked countries, and to “effectively guard against all kinds of risks and to better meet the needs of national economic and social development.”

Without naming the “One Belt, One Road” initiative directly, the State Council’s language leaves little room for confusion, directing Chinese companies to focus overseas investments on enterprises that “promote the ‘one way along the road’ construction” and “infrastructure interconnection” between countries.

The goal appears to be to limit Chinese companies’ exposure to overseas investment risk by channeling those funds into projects that support the Belt and Road initiative. This is evidenced by a statement released by another Chinese government entity on Friday. From Reuters:

“China will strengthen rules to defuse risks for domestic companies investing abroad and curb ‘irrational’ overseas investment in its Belt and Road initiative, the state planner said on Friday.

“The National Development and Reform Commission (NDRC) said in an online statement lauding the Belt and Road initiative that it would provide better guidance on risks to companies investing overseas in order to prevent ‘vicious’ competition and corruption.”

The NDRC statement highlights the Chinese government’s emphasis that the economic health of China itself should be a major consideration when contemplating overseas investments:

“Some companies focused on property rather than the real economy, which, instead of boosting the domestic economy, triggered capital outflows and shook financial security.”

This tendency of the Chinese government to go easy on companies looking to invest overseas in Belt and Road-linked enterprises was pointed out earlier this week in a Reuters exclusive published Tuesday:

“Companies enjoy a relatively smooth approval process for deals along the Belt and Road project as regulators tend to put them in a different basket when reviewing outbound investments, according to lawyers and dealmakers.”

Continuing, Reuters notes that outbound deals “currently take as long as six months to be approved by Chinese regulators” but that “Belt and Road investments tend to get regulatory clearance within three or four months.”

One Chinese financial analyst told Reuters that if you’re “doing One Belt, One Road, that becomes the first sentence in the document” for companies seeking approval to make overseas investments.

Andrew Polk, co-founder of research firm Trivium China, told Bloomberg on Friday that China’s codification of a new set of investment rules to favor Belt and Road projects makes sense given all the earlier indications:

“This is the state saying we want better say over where China’s resources are going abroad. We didn’t have a clear accounting of this before, but we could piece it all together from what was said by various elements of the government. Now it’s de jure policy while previously it was de facto policy.”

James Holbrooks

James Holbrooks

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