Foreign Firms Seek a Fair Shot at China’s New Silk Road Projects

China’s planned modern version of its ancient “silk road” may bring more than one trillion dollars of infrastructure investment along trading routes that wind through emerging markets in dozens of countries throughout Asia, Africa and Europe. “One Belt, One Road” (OBOR) trade routes, which stretch from China to London and to Africa, are intended to boost the economies of China and the many nations along the routes by making trading easier and cheaper.

But so far, these road, rail, pipeline, port, power grid, telecom, and other projects offer major opportunities for Chinese companies and not so many for outside firms.

The Chinese will take “most of the highest-profile projects,” said Researcher Derek Scissors of the American Enterprise Institute.

The author of China’s Asian Dream: Empire Building Along The New Silk Road, Tom Miller, said Chinese banks are financing much of the work with the goal of exporting Chinese technology and creating new demand for Chinese products. Miller said nations that use Chinese technology are more likely to buy Chinese products in the future and will work to boost Beijing’s political influence abroad.

Cornell University’s Lourdes Casanova, an expert on emerging markets, said China is using these investments to “gain strategic power.”

Five of the largest engineering and construction companies in the world [measured by revenue] are Chinese, said Casanova, as well as four of the five largest banks [by assets]. The Cornell University researcher and senior lecturer said Chinese companies gained experience building huge infrastructure projects at home that will help them handle major projects elsewhere.

“Chinese engineering firms perform better in difficult environments than any other firms in the world,” said Scissors, adding “they don’t necessarily have to show profits, and have accumulated experience in Pakistan, Nigeria, Ecuador, and elsewhere.”

It may be difficult to operate in some OBOR nations, Cornell’s Casanova said, but they will still attract investment because they need a “huge” amount of infrastructure.

New opportunities

Some foreign companies tell researchers the business climate in China is deteriorating, and they are rethinking investments, which might affect new projects like OBOR. A survey by AMCHAM (the American Chamber of Commerce in China) finds some firms slowing investment in China or moving some operations to other nations. Members complain that “inconsistent” enforcement of regulations puts foreign companies at a disadvantage while slowing economic growth is hampering opportunity.

But major U.S. firms – GE, Honeywell, and Caterpillar – already do a lot of business in China and see opportunities in the new silk road/OBOR projects.

Caterpillar’s revenues have been boosted by improving sales in China, and the firm says it has been “deeply involved” in the new silk road initiative which it sees as a “long-term opportunity.”

Caterpillar officials said the company uses global resources to focus on solving problems for customers in China and 20 other nations along the new silk road. In the 40 years, it has been in China, Caterpillar has evolved from importing machines to China, to sharing technology with local partners, to now operating factories and other facilities within China.

Honeywell employs 13,000 people in China and earned billions of dollars in revenue there in 2016. Company spokesmen say their workforce includes a couple of thousand Chinese scientists and engineers, who are helping establish Honeywell as a local Chinese company that can address the needs of local business and consumers. The company offers a wide range of China-made products that support oil & gas operations, airports, healthcare, and other activities

General Electric CEO Jeff Immelt said in a recent speech that his firm competes successfully in China and elsewhere with “local capability inside a global context.” He says GE has 20,000 employees in China with “multiple factories and research centers.” He said his company partners partnership with Chinese construction companies, and his firm leads in power, healthcare, avation, and petroleum.

Human rights

Human rights experts say another concern grows from the need to move some people out of the way of large infrastructure projects. Human Rights Watch China Director Sophie Richardson told VOA it is unclear what impact these large and ambitious projects will have on human rights, but she said there is reason for concern because some nations along the silk road routes “preside over widespread abuses.”

Richardson said China has “heightened surveillance and repression” to prevent unrest that might impede OBOR plans in that nation’s Xinjiang province. The far-western region of China is a key part of the silk road, and home to 10 million Muslim Uighurs, who differ in culture, language, and faith from China’s majority population. Xinjiang has long been the scene of ethnic and political tensions and is heavily patrolled by Chinese police and military units.

Richardson said private companies have a responsibility to respect human rights, and must take steps to mitigate or avoid risks. She said these obligations are spelled out by United Nations guidelines that have been embraced by key Chinese business organizations, and firms should be judged on how they handle peaceful protests of their activities.

leave a reply