After reviewing policy papers by leading think tanks, BRI focused academic papers, attending conferences and finally in conjunction with a recent research trip to China, Gregory Perdon, our Co-Chief Investment Officer, provides his thoughts on China’s Belt and Road Initiative in Arbuthnot Latham’s thought leadership paper.

Within our report, we outline China’s motivations behind the multi-trillion dollar initiative to link 65 nations encompassing over four billion people. We also provide case studies and consider, in depth, the European point of view, concluding with a schedule of policy recommendations.

What is China’s BRI – the New Silk Road?

The original Silk Road was a large network of roads and sea routes linking Asia with Europe and the wider Middle East. It facilitated the exchange of goods and technology along with languages and knowledge.

As we propel into the 21st century, China is establishing a network of routes for the trading of goods and services from east to west. Gregory believes it is arguably the largest infrastructure project of modern times. The initiative also aims to strengthen cooperation in several key areas such as policy coordination, infrastructure construction, trade facilitation and financial integration.

How will China benefit from the BRI?

Chinese priorities are clear, and we think of them as falling into two broad categories: ambitions that are geopolitical in nature and those that play into China’s reform agenda. Overall we would posit that the Chinese wish to integrate globally their financial system, promote economic growth, access new markets, ensure domestic security/stability, expand their military footprint and take back its place as the undeniable hegemon of Asia.

However, Gregory warns that although this monumental initiative by China has the potential to benefit the countries in which it invests, it could also cause debt problems for some emerging economies, fuel trade imbalances and perhaps divide the EU.

Nevertheless, the BRI is real and happening now.

China and the BRI impacts for investors

China is now such a dominant economy that index providers such as MSCI cannot ignore the impact when assessing regions or assets in the emerging markets economies. As such, they are beginning the process of including Chinese A-Shares into mainstream trackers such as the MSCI Emerging Markets index.

This, twinned with the renminbi emerging as the fifth major currency behind US dollar, euro, Japanese yen and British pound, is forcing investment committees around the world to take a view on whether to include China as a direct allocation.

Gregory concludes:

“We are publishing an extensive written review offering in-depth analysis of the motivations behind the BRI, the advantages and disadvantages, and its implications for geopolitics and global markets.”

Arbuthnot Latham presents ‘The New Silk Road’ at the DIFC

On 23rd September 2019, Arbuthnot Latham welcomed guests to the Dubai International Financial Centre where our Co-Chief Investment Officer, Gregory Perdon, delivered his talk on our investment report ‘The New Silk Road’.