This year marks the 5th anniversary of the “Belt and Road Initiative” (B&R). In the past few years, B&R gradually turned from a vision into achievements, enabling cooperation and interaction among countries participating in it. In view of the initial results achieved, it is time to look back and ahead to draw on the experience of the past five years to set longer-term goals and directions for B&R and further reinforce Hong Kong’s position and role in the initiative.
Terence Chong: Hong Kong’s Position as a Financing Platform in the “Belt and Road”
Many infrastructure projects in countries along the “Belt and Road” routes have been kicked off and completed since China put forward the “Belt and Road Initiative” (B&R). According to Terence Chong, Associate Professor of the Department of Economics and Executive Director of Lau Chor Tak Institute of Global Economics and Finance at the Chinese University of Hong Kong, as the B&R is a long-term national strategy, fruitful outcomes do take time to bear. While the effectiveness of many projects along the B&R routes are yet to be observed, constructions of electricity, infrastructure, and public works will prove to be very helpful for developing countries in the long run.
At present, electricity supply is still lacking in many countries along the B&R routes. Construction of infrastructures is a stage they must go through, as investment in infrastructure is inevitable in economic development. Chong reckoned that developing countries along the B&R routes must learn about the Chinese market, and concurrently, understand the hardware and software support that China is able to offer them.
Publicity on support must be presented with concrete details
Chong also pointed out that while the B&R initiative was launched five years ago, the Hong Kong business community does not seem to have grasped its specific details. With the inadequacy of information, he believed that the government should step up publicity to improve the industry’s understanding of the initiative. “The HKSAR government must ensure that the society understands the B&R is not a slogan. Publicity around it must not be too ideological. It is more important to provide the industries with more practical information, such as those projects and details in the B&R planning that have been confirmed, and those ports to be operated by the Mainland, etc.”。”
As certain policy details of the B&R are yet to be worked out, local companies are quite reserved with “going out”. Chong explained that as Hong Kong is a market-oriented economy, decisions on investment directions are made based on return of investment and value. Although certain companies are operating in regions along the B&R routes, the number is still on the low side. The HKSAR government needs to help businesses seek more favorable business policies, such as tax incentives, to help local companies expand their business to regions along the B&R routes.
Meanwhile, local companies should be more proactive towards the B&R initiative. Chong said, “We cannot always just sit back and wait for opportunities to knock at our doors. Hong Kong should step up its efforts in expanding into and connecting with markets along the B&R routes.” At present, businesses can apply for different funds set up by the HKSAR government. The “SME Export Marketing Fund”, for example, supports SMEs to expand into any market outside of Hong Kong, including export promotion in markets along the B&R routes. The fund encourages local businesses to grow beyond Hong Kong and tap into markets outside of the SAR.
Pursuing large financing projects
From the macroscopic perspective, Chong pointed out that Hong Kong has a financing platform position in the B&R initiative. He noted that the Hong Kong Monetary Authority is the only organization issuing Islamic bonds at present. We are yet to see any sizeable B&R projects financing in Hong Kong. The HKSAR government can be more active in its publicity efforts, working harder to pursue more sizeable financing projects so that other countries could consider financing through Hong Kong.
While investors may have reservations on certain regions along the B&R routes because of political factors, their remote locations and differences in language and culture, Chong reckoned that Hong Kong is still able to capitalize on its own strengths to identify new business opportunities. The tourism industry is an example. “Iraq, Iran, Kuwait and other countries of the Middle East are not yet considered popular destinations. The Hong Kong tourism industry can develop itineraries for these countries, and at the same time, act as the middleman for tourism between China and the countries and regions along the B&R routes. This is a mutually beneficial move as tourists from countries or regions along the B&R routes can also be attracted to visit Hong Kong.
Wing Chu: Hong Kong steadily aligns with B&R as super-connector
A survey conducted in the Mainland by the Hong Kong Trade Development Council (HKTDC) found that many Mainland enterprises in South China and the Yangtze River Delta region are keen to conduct trade and investment activities in B&R countries and overseas to explore new opportunities. Moreover, most of the Mainland enterprises “going global” regard Hong Kong as their preferred location for overseas professional services to help them enter the overseas market. Therefore, it is evident that Hong Kong’s “super-connector” role is very important.
Mainland enterprises rely on Hong Kong to tap into B&R opportunities
Wing Chu, Business Advisory Manager at the Research Department of the HKTDC specializing in B&R topics, pointed out that Hong Kong has multiple advantages as an international financial center, professional service platform and capital of brands. Hence, it can assist Mainland enterprises “going global” in foreign trade, finance, brand building, risk management, legal advice, overseas fund mobilization and accounting, while benefiting Hong Kong’s industrial, commercial and professional service sectors.
Mainland enterprises going to B&R countries and regions for business and investment often find the place unfamiliar and have few acquaintances. Chu said: “Many of the emerging markets in Central Asia, Eastern Europe and Southeast Asia have not yet matured in terms of trade and commerce development and relevant systems. Enterprises will inevitably encounter numerous obstacles if they lack the support of quality professional services and extensive foreign trade experience and only have passion to show for their efforts to respond to the national initiative.”
Chu stressed that Hong Kong’s mature development in international trade and investment, coupled with its sound legal system and quality professional services, are very useful to Mainland enterprises tapping into B&R opportunities.
HK businesses need Government support for information
Although Hong Kong is a market-led commercial society, Chu believes that the Government can play a supporting role, especially in providing timely and up-to-date information and guidance to help Hong Kong’s industrial, commercial and professional service sectors to keep abreast of B&R’s development.
Chu said that Hong Kong businesses only roughly know that B&R is a national macro policy, but they do not know how it will be implemented and transformed into commercial projects. It will be a pity to miss the opportunity for cooperation because of insufficient knowledge. Therefore, the Government can step up dissemination of business and market information about B&R to help clear any doubts that may arise.
Some Hong Kong SMEs believe that only large enterprises can benefit from B&R. Chu believes that this is not the case. “Known for their flexibility and adaptability, SMEs in Hong Kong are engaged in a wide range of business areas such as finance, project valuation and investment. Mainland enterprises will prefer partners of the same size and pay more attention to the company’s track record and experience. Thus, it is not necessary that they will only prefer large enterprises.”
Learn from blunders to become stronger
In Chu’s view, unlike in the initial stage of its launch five years ago, there will not be many pleasant surprises coming from B&R in the next five to ten years. Going forward, it will focus on specific tasks such as implementation, including trade and investment matters and market platform cooperation. “For example, as the relevant investment policies, laws and regulations in some emerging markets are not yet mature, the environmental standards may not be strict at the time of signing contracts with them. However, the required standards may gradually be tightened after the implementation of the investment project and investors may need to modify the project unpredictably, which could result in negative impact such as cancellation of investment projects. Despite such occasional blunders, we should learn from them to more steadily tap into the business opportunities from B&R.” Chu stressed that Hong Kong, which has always been adept at risk assessment and management, can also play a role in this aspect and provide forward-looking advice and solutions for Mainland enterprises.