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China's «one belt, one road»initiative is the biggest infrastructure push in contemporary history. Microfinancier Patrick Scheurle looks at the flip side of the gargantuan project, in his essay for finews.first. 

finews.first is a forum for renowned authors specialized on economic and financial topics. The texts are published in both German and English. The publishers of finews.com are responsible for the selection. This article has been co-written with Nick Gandolfo, Regional Manager South- und Southeast Asia & Pacifik at BlueOrchard.

In terms of foreign policy, the Chinese president Xi Jinping thinks big: the Belt and Road Initiative (BRI) – launched in 2013 under the name of «One Belt, One Road» – is the largest public-private cooperation project ever initiated. The aim of this initiative is to promote business by building a massive network of infrastructures with China being the central node of it, linking the country to Europe, Eurasia, Southeast Asia and even Africa.

The BRI covers the construction of roads, rails, pipelines, ports, airports, power stations and industrial estates. More than 100 countries and international organizations have joined the initiative so far. According to Fitch, China will allocate $150 billion each year for such projects, and up to $900 billion in total. In view of these massive investments, it is hardly surprising that many countries keep a wary eye on the BRI, which they consider as a strategy which aims at increasing China’s weight on the geopolitical stage. It is indeed clear that the BRI increases China’s leverage over its neighbors.

«Infrastructure investment needs in Asean are about $100 billion per year»

With projects like the high-speed railway in Laos for instance, Asean member states are precisely at the center of the BRI’s biggest projects, and could turn out to be the initiative’s biggest profiteer. Considering the strong ties between China and Asean – China has been Asean’s largest trading partner since 2009 and Asean China’s third-largest trading partner since 2011 – and the huge market Asean countries provide as the world’s seventh largest economy with more than 600 million people, it is reasonable that the BRI prioritizes these countries.

In September 2016, Asean adopted a Master Plan on Connectivity 2025 (MPAC 2025). With a strong focus on infrastructure, trade, investments and strengthening economic connections, MPAC’s goals are pretty much in line with BRI’s. In order to realize the objectives set in MPAC, Asean will need huge accrual of capital. According to Unctad, infrastructure investment needs in Asean are about $100 billion per year.

The BRI, which is backed financially by both the Chinese government and Chinese banks as well as by the Asian Infrastructure Investment Bank, might be able to close a part of the gap. In this way, BRI will significantly help Asean to develop and strengthen its infrastructure, thereby stimulating the economic activity of local markets and opening up opportunities for small- and medium-sized enterprises (SMEs) to benefit from these projects.