An Overview of the Belt and Road Initiative

©2019 EU SME Centre

An Overview of the Belt and Road Initiative

Compiled in Partnership With

November 2019

An Overview of the Belt and Road Initiative

©2019 EU SME Centre

This EU SME Guide was written by:

Jiawei Xu, Assistant Director, Energy, Environment and Infrastructure, China-Britain Business Council

Mark Hedley, Director, Technology and Innovation, China-Britain Business Council

Weifeng Ma, Director, Stakeholder Relations East China, China-Britain Business Council

Patrick Allum, Research Team, China-Britain Business Council

Ben Rotheram, Copywriter, China-Britain Business Council

Disclaimer

This document is provided for general information purposes only and does not constitute legal, investment or

other professional advice on any subject matter. Whereas every effort has been made to ensure that the

information given in this document is accurate, the EU SME Centre accepts no liability for any errors,

omissions or misleading statements, and no warranty is given or responsibility accepted as to the standing of

any individual, firm, company or other organisation mentioned. Publication as well as commercial and non-

commercial transmission to a third party is prohibited unless prior permission is obtained from the EU SME

Centre. The views expressed in this publication do not necessarily reflect the views of the European

Commission.

An Overview of the Belt and Road Initiative

©2019 EU SME Centre

Table of Contents 1. Overview ........................................................................................................................................ 1

2. Economic Corridors ........................................................................................................................ 4

2.1. The New Eurasian Land Bridge .............................................................................................. 4

2.2. China-Mongolia-Russia Economic Corridor .......................................................................... 4

2.3. China-Central Asia-West Asia Economic Corridor ................................................................ 5

2.4. China-Indochina Economic Corridor (“CIPEC”) ................................................................... 5

2.5. Bangladesh-India-China-Myanmar (“BCIM”) ....................................................................... 5

2.6. China-Pakistan Economic Corridor (“CPEC”) ....................................................................... 6

2.7. 21st Century Maritime Silk Road ............................................................................................ 6

2.8. Digital Silk Road ..................................................................................................................... 6

3. Key BRI Provinces ......................................................................................................................... 8

3.1. North West .............................................................................................................................. 8

3.1.1. Gansu Province ................................................................................................................ 8

3.1.2. Ningxia Province ............................................................................................................. 9

3.1.3. Qinghai Province ............................................................................................................. 9

3.1.4. Shaanxi Province ............................................................................................................. 9

3.1.5. Xinjiang Province .......................................................................................................... 10

3.2. South West ............................................................................................................................ 10

3.2.1. Chongqing ...................................................................................................................... 10

3.2.2. Sichuan Province ........................................................................................................... 11

3.2.3. Yunnan Province ............................................................................................................ 11

3.3. South and South East ............................................................................................................. 12

3.3.1. Hainan Province ............................................................................................................. 12

3.3.2. Fujian Province .............................................................................................................. 12

3.3.3. Guangdong Province ...................................................................................................... 12

3.3.4. Guangxi Province ........................................................................................................... 13

3.3.5. Jiangsu Province ............................................................................................................ 13

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3.3.6. Zhejiang Province .......................................................................................................... 14

4. Key BRI Sectors ........................................................................................................................... 15

4.1. Infrastructure, Energy, and Built Environment ..................................................................... 15

4.1.1. Physical and Digital Infrastructure ................................................................................ 15

4.1.2. Energy, Renewables, and Resources ............................................................................. 15

4.1.3. Advanced Manufacturing and Transport ....................................................................... 16

4.2. Structured Finance ................................................................................................................. 17

4.2.1. Financial and Professional Services ............................................................................... 17

4.2.2. Greening the BRI ........................................................................................................... 17

4.3. Agriculture and Environment ................................................................................................ 18

4.4. E-commerce and Logistics .................................................................................................... 18

5. Conclusion .................................................................................................................................... 20

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1. Overview

It has now been six years since Chinese President Xi Jinping launched the Belt and Road Initiative (“BRI”)

and four years since the Digital Silk Road was added to its priorities. At its core, the BRI aims to strengthen

infrastructure, trade, and investment links between China and some 65 other countries that collectively

account for over 30% of global GDP, 62% of the world’s population, and 75% of known energy reserves.1

Investment bank Morgan Stanley has predicted that by 2027 China will have invested as much as EUR 1

trillion in the BRI. This makes it the biggest infrastructural investment programme in history.

The project utilises the historic land and sea trade routes of the ancient Silk Road, re-establishing the

highways of commerce across central and southern Asia which were once traversed by explorer Marco Polo

and Chinese admiral Zheng He. It is China’s landmark foreign policy, and represents the country’s bid to re-

emerge as a globally-engaged trading nation: in recent years tangible developments have been observed which

match this ambition. Between 2013 and 2018, trade volume with countries along the Belt and Road routes

exceeded EUR 5.7 trillion, of which the 2018 figure stood at EUR 1.15 trillion, up by 16.3% year-on-year.2

To advance its objectives, China has invested significant diplomatic resources, signing 123 cooperation

agreements with 105 countries across Asia, Africa, Europe, Latin America, and the South Pacific region, and

26 similar documents with 29 international organizations.3 This comes in addition to a large number of signed

Free Trade Agreements that cover more than 20 countries. There are also positive developments in

cooperation between the EU and China, which act as the end points of the New Silk Roads. Notably, the EU

launched its “EU-Asia Connectivity Strategy” in late 2018, which aims to enhance the prosperity, safety, and

resilience of people and societies across Europe and Asia. This illustrates that both sides broadly agree on the

importance of connectivity and mutually beneficial cooperation through the forging of physical and digital

infrastructure, as well as people-to-people exchange. According to the Chinese Academy of International

Trade and Economic Cooperation (“CAITEC”), which sits under the Ministry of Commerce (“MOFCOM”), it

is important to accelerate third-party market cooperation, align with the “EU-Asia Connectivity Strategy”, and

expedite the launch of concrete projects.

The BRI’s ambitions are grand and require significant funding. Since 2016, the Asian Infrastructure

Investment Bank (“AIIB”) has extended its membership to 100 countries4 and, together with the EUR 36

billion-strong Silk Road Fund established by China in 2014,5 is already investing in BRI projects. So too are

the New Development Bank (“NDB” - formerly referred to as the “BRICS Bank”), the Shanghai Cooperation

Organisation Development Bank, sovereign wealth funds, and newly-established local provincial level “Silk

Road Funds”.6 Despite these efforts, significant gaps in funding still exist and these will need to be filled by

the government, or perhaps more likely by the private sector.

The vast scale of BRI projects, and the large sums of money involved, may seem unattainable to many small

and medium-sized enterprises (“SMEs”). However, there are signs of change. Not only are smaller projects

and market opportunities emerging - which are more suited to EU SMEs that increasingly form part of the

BRI (namely public-private partnerships) - but there are growing levels of investment in connectivity under

the framework of the EU-Asia connectivity agenda, which has seen the EU and China move towards aligning

1 The World Bank, https://www.worldbank.org/en/topic/regional-integration/brief/belt-and-road-initiative 2 China Daily, http://www.chinadaily.com.cn/global/2019-03/04/content_37443354.htm

See also: statistics for January and February 2019, https://eng.yidaiyilu.gov.cn/qwyw/rdxw/82177.htm 3 Belt and Road Initiative.com, https://www.beltroad-initiative.com/memorundum-of-understanding-belt-and-road-

initiative/ 4 The Asia Infrastructure Investment Bank, https://www.aiib.org/en/index.html 5 The Silk Road Fund, www.silkroadfund.com.cn/enweb/23773/index.html 6 PricewaterhouseCoopers, https://www.pwc.com/ee/et/publications/pub/pwc-gmc-repaving-the-ancient-silk-routes-web-

full.pdf

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their infrastructure goals. For example, the European Bank for Reconstruction and Development (“EBRD”),

though not officially part of the BRI, has made funding available for projects in a number of core BRI

countries such as Turkey, Ukraine, and Kazakhstan, and since 2009 has invested more than EUR 2 billion in

Turkey alone.7 In 2014 the EBRD also launched its “Small Business Initiative”, which helps SMEs by

offering technical know-how and expertise, direct financial support, as well as risk mitigation through co-

financing. In 2017 the Small Business Initiative included 527 advisory projects with SMEs and investment of

EUR 72 million in Mongolia and across Central Asia.8 The EBRD could also play a significant role in

creating opportunities for smaller companies under the BRI: 80% of its investments are in the private sector,

which would balance a BRI that has up to now been driven by Chinese state-owned enterprises (“SOEs”).9

Combined with the aforementioned “EU-Asia Connectivity Strategy”, and a 30% increase in the European

External Action budget for the period from 2021-2027, the opportunities for EU SMEs along the Belt and

Road look set to improve significantly.10

What are the main themes of the BRI? As it comes of age it is possible to identify a number of key

developments and trends which have started to emerge both in China and along the BRI’s Economic

Corridors:

• Investment in ports across the maritime routes; capacity and interconnectivity are developing at a

pace, with a number of projects nearing completion;11

• New and expanding energy routes for China’s oil, gas, and natural resource import needs;

• International expansion of China’s rail freight business, which saw an increase of 72% in 2018,

compared with 2017;12

• Regional interconnectivity of high-speed rail, highways, and telecoms networks;

• Continued investment in China’s aviation sector for route expansion;

• Chinese investment in power generation and renewable energy sectors in developing countries;

• Urbanisation and smart city planning;

• Growing opportunities for China’s construction and engineering sectors in developing countries;

• Development of bilateral industrial, technological, and trade zones in China and developing countries;

• Country cooperation in manufacturing, production capacity, and supply chain efficiency;

• Country cooperation in research, science, and technology development;

• Regional cooperation in banking and information-sharing for cross-border transactions;

• Increasing need for risk management and other professional service enablers along the BRI.

As the roads are “paved” by the construction of large core infrastructure assets, such as ports, railways, roads,

airports, power plants, and energy supply and communication networks, it will foster growth opportunities in

industrial and market development and international trade, opening up opportunities in trade, investment,

services, and operations.

In short, while the scale and complexity of the BRI can seem beyond the reach of EU SMEs, there is clearly a

process of change underway as large companies involved in the BRI increasingly look to smaller, more

specialised companies to fulfil contracts. The continuous development of the BRI, twinned with greater EU-

7 The European Bank for Reconstruction and Development, https://www.ebrd.com/home

See also: Opportunities along the New Silk Road, https://www.ebrd.com/news/speeches/integration-along-the-new-silk-

road.html 8 The EBRD Small Business Initiative, https://smallbusiness-ebrd.com/where-we-work/central-asia-and-mongolia/ 9 The EBRD, https://www.ebrd.com/news/speeches/integration-along-the-new-silk-road.html 10 http://europa.eu/rapid/press-release_MEMO-18-5804_en.htm;

See also: EU-China trade figures 11 https://webgate.ec.europa.eu/isdb_results/factsheets/country/overview_china_en.pdf 12 http://focus.cbbc.org/focus#news/belt_and_road_update_february_2019

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China cooperation, and a healthy growth in two-way trade, means that opportunities for smaller companies

will likely continue to grow.13

13 For data on the EU China Trade see the EU’s sectoral data 2014-2018:

https://webgate.ec.europa.eu/isdb_results/factsheets/country/overview_china_en.pdf

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2. Economic Corridors

The BRI is made up of six terrestrial “Economic Corridors” that lead from China through South and South-

East Asia, the Middle East, and across Central Asia to Europe. These Economic Corridors are mainly

identifiable by the development of large-scale transport infrastructure that will form physical connections

between the regions and sub-regions covered by the BRI. Alongside this, there are a number of economic and

industrial zones spread throughout China that, while not created as part of the BRI, nevertheless promote

investment in targeted industries, such as manufacturing. These zones offer favourable policies, such as lower

tax rates and fewer restrictions, to companies setting up there, and many of them actively seek international

companies and investors through additional incentives to attract international talent. China’s economic and

industrial zones aim to make it easier for Chinese companies to grow and for international companies to enter

China and develop once there, and many of the products and services provided through these zones will make

use of or will be made use of by industries along the Belt and Road.

Additionally, the BRI’s maritime component, the 21st Century Maritime Silk Road, connects and overlaps

with the three southern Economic Corridors before moving on to East Africa and the Mediterranean Sea,

while also seeking to expand and connect projects and trade routes across the Middle East. The final element

is that of the Digital Silk Road which involves the roll out of telecoms networks, enabling China’s world-

leading E-commerce giants to expand into new markets and increasing data flow speeds. Ultimately this will

lay the ground for the increased use of smart technology in cities.

2.1. The New Eurasian Land Bridge

The New Eurasian Land Bridge, also known as the Second or New Eurasian Continental Bridge, connects

Europe’s major industrial and port cities - such as Duisburg, Warsaw, Hamburg, and Rotterdam - with China’s

major manufacturing cities, including Chongqing, Chengdu, and Zhengzhou.14 Under the project, freight trains

will travel through northern China and Kazakhstan, and onward to Russia, Poland, Germany, finally arriving

in the Netherlands. This route crosses three separate railways, traverses 12,000km, and takes approximately

15-20 days to complete - less than half the time it would take by sea.15 It is worth nothing that in 2018 6,300

freight trains travelled between China and Europe which was a 72% increase on the previous year; 2,690

trains made the return journey. Furthermore, it is likely that the rail freight industry will continue to grow as

65 freight rail routes have been opened between Chinese cities and 44 cities in 15 European countries.16 As a

complement to the existing air and sea infrastructure, the expansion in rail freight offers good opportunities

for EU SMEs, for companies that produce high-value electronics and machinery in particular. Companies such

as Dell, HP, and Foxconn have taken full advantage of these opportunities with their high-value, small-sized

products. The Chinese government also offers significant subsidies of EUR 1,500 per container (“TEU”),

which could be attractive to SMEs with low levels of capital.

2.2. China-Mongolia-Russia Economic Corridor

This Economic Corridor overlaps with the New Eurasian Land Bridge route and could be divided into two

routes: from Beijing/Tianjin/Hebei Province to Russia via Inner Mongolia Province, Mongolia and

Kazakhstan, or from Dalian to Russia via Heilongjiang, Inner Mongolia, Jilin, and Liaoning Provinces. This

route both complements China's BRI and the Russian Transcontinental Rail Plan, as well as Mongolia's Prairie

Road Programme. The Transcontinental Rail Plan is a series of rail and road links between Beijing and

Moscow, while the Prairie Road Programme is a set of projects that include oil and natural gas pipelines with

14 https://www.forbes.com/sites/wadeshepard/2018/03/22/the-hidden-economic-rationale-of-china-europe-

rail/#5036bdd40d11 15 CBBC, New Opportunities in China and Beyond, p4, 6, & 10 16 CBBC, FOCUS: February 2019 Belt and Road Update

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railways and roads. In addition to the existing international rail freight routes between the Russian Far East

and China’s large cities, both countries have given the green light for a new hyperloop system which will

expedite trade along this route at speeds of 540kmph.17 Overall, this route is being developed in cooperation

with the Eurasian Economic Union, led by Russia, and as a part of a series of infrastructure agreements signed

between Belarus, Kazakhstan, and Russia in May 2015, which aim to develop high-speed rail, energy

infrastructure and aerospace, industrial parks, and trade zones with RMB settlement.18 Internationalisation of

the RMB is one of the BRI’s core objectives, and in years to come payment in RMB may proliferate.

2.3. China-Central Asia-West Asia Economic Corridor

This route is effectively a subsidiary of the New Eurasian Land Bridge, meaning it benefits from some of the

former’s funding. At present, however, it suffers from slow transit speeds owing to lengthy border procedures

and inconsistent highway quality, in addition to a lack of supporting infrastructure for these routes (such as

fuel stations), leaving it as a second-best option. These difficulties are being overcome through new rail

connections and expanded Caspian Sea ferry services, which are expected to be handling 17 million tonnes of

cargo by 2030.19 The majority of projects along this route nonetheless consist of energy pipelines, which

connect the Near East, Turkey, and Iran, with Xinjiang Province by running through Uzbekistan, Kazakhstan,

and Turkmenistan. These pipelines will be connected with the West-East gas pipeline in China, which is

currently being built. In addition, China has signed several cooperative agreements with Kazakhstan,

Kyrgyzstan, and Tajikistan to work on trade facilitation and logistics for the corridor.20

2.4. China-Indochina Economic Corridor (“CIPEC”)

Often referred to as the “ASEAN link” of the BRI, the CIPEC is essentially being integrated into many

existing ASEAN plans, most notably the “Master Plan on ASEAN Connectivity”. The focus of this corridor is

to connect Southern China, mainly the Pearl River Delta, with Peninsular Southeast Asian countries such as

Cambodia, Laos, Myanmar, Thailand, and Vietnam, as well as Malaysia and Singapore. New high-speed

railways and motorways will run from the Pearl River Delta in South China to Singapore via Nanning in

Guangxi Province and Hanoi in Vietnam. This initiative aligns with development goals set by the Asian

Development Bank, serving as a platform for joint construction projects and industrial cooperation in the

Mekong River Delta. Kunming in Yunnan Province is also set to benefit from this project, acting as a hub for

trade between Myanmar and China.

2.5. Bangladesh-India-China-Myanmar (“BCIM”)

The BCIM is the contemporary continuation of the “Kunming Initiative” (now known as the “CIM Forum for

Regional Economic Cooperation”), which was founded by these four countries in 1999 to promote joint trade,

connectivity, and economic development. Like the other Economic Corridors in the BRI, its main aims are to

increase the cross-border flow of goods and people, lower trade barriers, and increase connectivity. The

BCIM’s backbone infrastructure project is a proposed 2,800km route that starts in Kolkata (India) and ends in

17 Reconnecting Asia, https://reconnectingasia.csis.org/analysis/entries/hyperloop-silk-road/

See also: https://www.supplychaindigital.com/technology/hyperloop-could-be-here-3-years-what-expect 18 CBBC, New Opportunities in China and Beyond, p7 19 https://www.bloomberg.com/news/articles/2017-10-30/azerbaijan-to-open-railway-planned-as-new-europe-china-

corridor

See also: https://www.chinausfocus.com/finance-economy/along-chinas-middle-corridor-a-view-from-the-ground 20 CBBC, New Opportunities in China and Beyond, p12

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Kunming (China), passing through Mandalay (Myanmar) and Dhaka (Bangladesh), which will be made up of

railways, motorways, waterways, airways, and telecommunications networks.21

2.6. China-Pakistan Economic Corridor (“CPEC”)

As the name suggests, the CPEC is essentially a bilateral affair. Of the Economic Corridors, it represents the

most comprehensive cross-sector partnership along the BRI.22 Its flagship project is the Gwadar Port which, as

of early 2019, is able to operate at full capacity, alongside the planned Gwadar International Airport that broke

ground on 29th March 2019.23 Other projects are at various stages of completion and aim to link Gwadar with

the Chinese city of Kashgar, Xinjiang Province, via an interconnected network of rail, road,

telecommunications (a fibre optics cable), and energy supply (an oil pipeline) infrastructure.24 In addition,

more than 50% of the investment is being directed at energy projects that seek to address Pakistan’s severe

energy shortage of up to 7,000MW (around a third of the current national demand for electricity), many of

which are now finished. During President Xi’s visit to Pakistan in 2015 a number of agreements were signed

between the two countries, covering energy, ICT, transport infrastructure, amongst other areas.25

2.7. 21st Century Maritime Silk Road

In October 2013, President Xi announced the launch of the Maritime Silk Road in Indonesia. With the

Maritime Silk Road, China seeks to establish its role as a global maritime trading power. This is being done

by building up infrastructure at key trading hubs and developing new supply routes. China’s trade with

countries along the Maritime Silk Road has risen by an average of 18% a year over the past decade. During

that time, Chinese companies’ direct investment into these countries has also grown from around EUR 227

million to more than EUR 8 billion.26

2.8. Digital Silk Road

Unveiled in 2015, the Digital Silk Road is expected to account for up to 20% of China’s BRI investments,

totalling up to EUR 178 billion.27 The Digital Silk Road focuses on promoting China’s most innovative

industries along the BRI through a number of mediums, including telecoms, E-commerce, and smart cities, all

of which involve the use of advanced cloud computing to deepen connectivity. Besides the road, rail, air, and

sea corridors that have formed along BRI routes, the Digital Silk Road forms a crucial role in helping the areas

around them to grow. In telecoms, Chinese SOEs are systematically upgrading Internet connections by laying

up to 34 undersea and cross-border cables, with the aim of cutting data packet travel times between London

and Tokyo by 30%, and rolling out broadband in countries where such infrastructure is under-developed or

non-existent, in turn boosting their economies.28 The Digital Silk Road also includes the expansion of China’s

fintech and E-commerce influences, not only by expanding the use of WeChat-style apps, which incorporate

many functions of traditional apps, but also in the supply of fintech itself. This extends financial inclusion to

poorer countries along the routes through mobile payments, which remove the need for having a bank account

– something that many people within these areas lack. This increases access to small scale credit, which can

21 For more information, see

http://www.ipcs.org/issue_briefs/issue_brief_pdf/IPCS_Special_Report187_BCIM_Economic_Corridor_RIyer_May201

7.PDF 22 http://cpec.gov.pk/progress-update 23 http://www.radio.gov.pk/29-03-2019/development-of-gwadar-will-benefit-entire-world-pm 24 http://cpec.gov.pk/project-details/40 25 CBBC, New Opportunities in China and Beyond, p14y 26 Xinhua, “China’s trade with Maritime Silk Road countries rises 18 pct. annually” 27 https://www.siemens.com/innovation/en/home/pictures-of-the-future/infrastructure-and-finance/belt-and-road-

initiative.html 28 https://www.prysmiangroup.com/staticres/insight-3-2018-en/tracking-the-future/digital-silk-road-forging-ahead.html

See also: https://www.sciencefocus.com/future-technology/the-digital-silk-road-chinas-200-billion-project/

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boost consumption and SME trade. Despite potential loss in the short term, these investments position China

to take a lead in these industries in the future, generating new business for a range of Chinese companies.29

Finally, smart cities essentially represent an extension of cloud computing which has long been expanding

worldwide. However, the large E-commerce company Alibaba’s “City Brain” system takes this one step

further by using big data and AI in tandem with cloud computing infrastructure. The system has now been

employed in both Hangzhou in China and Kuala Lumpur in Malaysia.30 This is the first case of these services

being provided in foreign countries.

29 HSBC, https://www.business.hsbc.com/belt-and-road/bri-rising-to-the-fintech-challenge 30 CSIS, https://www.csis.org/analysis/chinas-digital-silk-road

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3. Key BRI Provinces

Figure 1: Key Provinces of the Belt and Road in China

3.1. North West

3.1.1. Gansu Province

The Gansu Provincial Government announced in 2017 that it aimed to make Gansu Province the “golden

section” of the New Silk Road. To this end, the development of the Lanzhou New Area (“LNA”) was

allocated EUR 17.75 billion euros in 2018, in a bid to help Gansu Province become a major gateway to

“China’s booming interior”.31 The flattening of 700 mountains to make space for the new area may seem

extreme, but it represents a key investment in future prosperity. Indeed, there is every reason to believe the

LNA’s proximity to air and high-speed railway links, combined with the large number of supporting projects,

and wider investment under the BRI, will pay dividends as westward trade gathers steam – even if it has to

alter the region’s topography to do so.32

In addition, following statements of the desire to develop eight Gansu “node cities”, in March 2018 the

National Development and Reform Commission (“NDRC”) announced a development plan for the period to

2035, which stated an intention to develop Gansu Province as a BRI logistics hub through a new Lanzhou-

Xining city cluster in the western provinces. This project would involve the construction of energy pipelines

and transport infrastructure following similar urban-cluster development plans spanning Shanxi and parts of

Gansu in February.33 Furthermore Gansu Province continues to intensify its cooperation with sister cities in

31 https://www.lanzhounewarea.com/ 32 https://www.irishtimes.com/news/world/asia-pacific/mountains-flattened-as-lanzhou-builds-on-the-new-silk-road-

1.3703342 33 http://country.eiu.com/article.aspx?articleid=626742246

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neighbouring countries such as Kyrgyzstan, Iran, and Kazakhstan. 34 In addition to these plans, Gansu

Provincial government has also signed cooperation agreements with the World Food Programme, the

Pakistani Agricultural Commission, and several other enterprises on topics relating to agricultural technology

and investment.

The province’s GDP in the first quarter of 2018 versus that of the previous year rose by 13.4%.35

There is some evidence that Gansu Province is already reaping benefits from its BRI plans: in 2016 the value

of its trade with BRI countries rose by over 10%.i36 Furthermore, Dunhuang has already seen a surge in

tourism in 2017, with revenues rising by over 20% from 2016.37 Gansu Province is also hoping to capitalise

on the Lanzhou New District and the Wuwei Logistics Centre to accelerate construction of western-facing air

and land ports.

3.1.2. Ningxia Province

The Ningxia Hui Autonomous Region will play a key role in the implementation of the BRI due to its growing

economic relations with Middle Eastern countries. This has brought in a large amount of capital investors

from Arab states wishing to diversify their own investments through encouraging innovation in financial

products and the development of financial institutions. There are now direct flights between the provincial

capital of Ningxia Province - Yinchuan - to Kuala Lumpur, Dubai, Doha, and Cairo.38 As well as this air-

based Silk Road, the province also hopes to establish itself as a key point along both the land-based Silk Road

and the “Online Silk Road”. Ningxia is investing in its transport links with neighbouring regions, looking to

become a key transit point between China’s East and West. It is also cooperating with E-commerce companies

like Alibaba in order to advance its own online commercial ventures, as well as accelerating the development

of smart cities and big data centres.39

3.1.3. Qinghai Province

Qinghai Province is located along the ancient Silk Road between the provinces of Tibet and Xinjiang. The

province is working hard to improve its transportation links in order to maximise its existing advantages,

including its strategic location, an already booming rare earth metals sector, and a growing clean energy

industry.40 These industries, mixed with a low cost of initial investment, make it a prime market for growth.

Private investment is being sought in real estate, tourism, energy, and infrastructure. A key BRI project in

Qinghai is the China-Europe freight train, which passes through the Qaidam Basin. This rail line runs through

Qinghai Province to Xinjiang Province and reaches Russia through Kazakhstan.41

3.1.4. Shaanxi Province

Shaanxi Province is located at the centre of China. To capitalise on its location, Shaanxi provincial leaders are

seeking to establish five BRI centres there, focusing on regional finance, international tourism, technology and

34 China Daily, “Gansu set to star in 'belt and road' plan”, www.chinadaily.com.cn/m/gansu/2015-

04/17/content_20440357.htm 35 http://www.yidaiyilu.gov.cn/info/iList.jsp?tm_id=513 36 【一带一路·合作共赢】“一带一路”擘画甘肃发展新蓝图” Yi dai yi lu he zuo gong ying yi dai yi lu bo hua gan su fa 37 China Daily, “Gansu's Dunhuang sees surge in tourism thanks to Belt and Road Initiative”, 38 Xinhua Net, “Ningxia grasps opportunities brought by "Belt and Road" initiative”, http://www.news.cn/english/ 39 China Daily, “Gansu set to star in 'belt and road' plan”, www.chinadaily.com.cn/m/gansu/2015-

04/17/content_20440357.htm 40 China Daily, “Qinghai looks to investment for economic advancement”, www.chinadaily.com.cn/business/2017-

06/20/content_29819103.htm 41 China Daily, “Cargo train links China’s Qinghai with Russia”, http://www.news.cn/english/

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education, international industrial cooperation, and transportation, trade, and logistics.42 Premier Li Keqiang

has called on the province to push forward with the development of burgeoning industries such as E-

commerce, logistics, and high-end manufacturing.43 Shaanxi Province can also leverage its status as an

aerospace and science hub within China to reap further benefits from the BRI.44 Efforts to develop Shaanxi

Province’s E-commerce sector have already led to the emergence of a fast growing industry cluster within the

Xi'an International Trade and Logistics Park section of the Shaanxi Pilot Free Trade Zone.45

3.1.5. Xinjiang Province

Xinjiang is China’s gateway to Central Asia, serving as a connecting point to Russia, Kazakhstan, Kyrgyzstan,

Tajikistan, and Mongolia (Xinjiang shares more borders with foreign countries than any other province). With

the completion of the Baku-Tbilsi-Kars railway, Xinjiang Province has an opportunity to build upon its

transport links to Central Asia and take on a key role in the distribution of goods to Europe.46 The provincial

government is exploring ways to create more free trade zones for the border regions. Additionally, Xinjiang

Province is undergoing an infrastructure boom with a focus on rail and roads: the Chinese government

announced investment of EUR 20 billion in roads alone for 2017.47 The construction of thirty logistics parks,48

and a push for greater cross-border E-commerce, will complement this infrastructure investment and help

transform Xinjiang Province into a major BRI province, serving as a transportation, storage, and distribution

hub.49

3.2. South West

3.2.1. Chongqing

Chongqing municipality’s location at the conjunction of the Yangtze River Economic area and the BRI makes

it a key hub for transportation in western China. The city’s status as an important transportation hub was

furthered with the August 2017 opening of the new Terminal 3 at Chongqing Jiangbei International Airport,

one of the 10 busiest airports in China for both passenger flights and cargo traffic in 2018.50 In January 2019,

two major train stations were opened – Chongqing West and the refurbished Shapingba Station – with new

high-speed rail routes to Guiyang and Chengdu launched at the same time. For many years, Chongqing has

been an important manufacturing base in China, forming a key part of the country’s supply chain, and the BRI

will likely contribute to this. Trade along the Chongqing-Xinjiang-Europe Railway (a key BRI project) has

surged, with trips increasing by over 50% in 2018.51

The Chongqing Connectivity Initiative has improved collaboration between Chongqing and Southeast Asia

(particularly Singapore), and two memorandums of understanding were signed at a 2018 summit. Agreements

42 China Daily, “Shaanxi prospers from Belt and Road development”, www.chinadaily.com.cn/business/2017-

05/12/content_29323217.htm 43 China Daily, “Li: Shaanxi must exploit Belt, Road”, www.chinadaily.com.cn/china/2017twosession/2017-

03/10/content_28501186.htm 44 China Daily, “Belt and Road offers tangible benefits”, www.chinadaily.com.cn/opinion/2017-

05/09/content_29258859.htm 45 Belt and Road Portal, “Belt and Road countries eye Shaanxi FTZ” https://eng.yidaiyilu.gov.cn/qwyw/rdxw/32495.htm 46 China Daily, “Baku-Tbilisi-Kars railway will enhance connectivity in Eurasia”, www.chinadaily.com.cn/opinion/2017-

05/09/content_29258859.htm 47 “China to pump over $24bn into Xinjiang road projects for better connectivity with Pakistan”

www.dawn.com/news/1313294 48 “Why Xinjiang is well positioned to gain from Belt & Road plan”, www.ejinsight.com/20170911-why-xinjiang-is-

well-positioned-to-gain-from-belt-and-road-plan/ 49 “Why Xinjiang is well positioned to gain from Belt & Road plan”, www.ejinsight.com/20170911-why-xinjiang-is-

well-positioned-to-gain-from-belt-and-road-plan/ 50 2018 年民航机场生产统计公报 (in Chinese). Civil Aviation Administration of China. 51 http://www.xinhuanet.com/english/2019-01/27/c_137778416.htm

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included the enhancement of regional connectivity through the Southern Transport Corridor, between

Southwest China and Southeast Asia, and the development of Chongqing’s fintech industry with an alliance

between the Singapore Fintech Association and Chongqing authorities.52 Singapore’s CapitaLand is nearing

completion of the EUR 4.2 billion Raffles City Chongqing development project, which is expected to open in

2019.53 Chongqing Free Trade Zone, established in 2017, has become a significant channel for products from

BRI countries to enter southwest China, including at the 2018 Belt and Road Brand Expo, which was hosted

in Chongqing’s FTZ. 54 EU SMEs will find many opportunities for collaboration with businesses and

universities in this fast-growing municipality.

3.2.2. Sichuan Province

Sichuan Province falls along both the Yangtze River Economic Belt and Bangladesh-China-India-Myanmar

Economic Corridor, making the provincial capital, Chengdu, an important link in China’s western

manufacturing supply chain and key in the BRI. Sichuan is home to a diverse and advanced manufacturing

industry.55 In 2018, the "Belt and Road" Global Partners Automobile Trade Fair was launched at the Chengdu

International Motor Show, with participation from representatives and buyers groups from many BRI

countries, while the Consul General of Pakistan in Chengdu shared his government’s suggestions on how to

enter the Pakistani automobile market.56 Authorities in Sichuan Province have reported major breakthroughs

in creating a good business environment in the China (Sichuan) Pilot Free Trade Zone, including innovative

combined bills of lading on Chengdu-Europe railway channels allowing for significantly reduced costs and

red tape for importers.57 For example, in 2018, the business registration time was slashed in Chengdu from 20

days to two.58 Combined with the soon to be completed second airport, Tianfu International, these recent

changes create further opportunities for the logistics and tourism industries.59

3.2.3. Yunnan Province

Yunnan Province shares a border of over 4,000km with Laos, Myanmar, and Vietnam, and is also linked to

Thailand and Cambodia along the Mekong-Lancang River. This proximity has made Yunnan Province an

important BRI province for China to develop land links with South and South East Asia, potentially enabling

more trade routes directly to the Indian Ocean overland through Myanmar.60 Several major road projects to

connect the province with South-East Asia are underway. The recently finished G56 highway has connected

the Myanmar border with Kunming and many other cities in China. Once completed, Kunming (which is the

provincial capital) will be connected with Haiphong, Bangkok, Ruili, Kolkata, and Yangon. Additionally,

Yunnan Province is becoming a key hub in China's high-speed rail push in South East Asia. Once these rail

connections are completed, one will be able to travel from Shanghai or Beijing to as far as Singapore via

Kunming via high speed rail. The development of these transport links, as well as the creation of economic

and high-tech development zones, will likely open up many opportunities in the logistics, tourism, and

financial and professional services sectors.61 Several major projects have already been completed involving

52 https://www.straitstimes.com/business/economy/10-mous-boosting-regional-links-inked-at-first-chongqing-singapore-

financial-summit 53 https://www.fastcompany.com/90313553/see-chinas-groundbreaking-4-8b-horizontal-skyscraper 54 http://english.liangjiang.gov.cn/2018-11/28/content_37327231.htm 55 “One Belt, One Road plan key to China-Singapore ties”, www.straitstimes.com/business/economy/one-belt-one-road-

plan-key-to-china-spore-ties 56 https://www.chinamoneynetwork.com/2018/08/31/chengdu-2018-belt-and-road-global-partners-automobile-trade-fair-

launched-for-the-first-time-at-the-chengdu-international-motor-show 57 https://www.telegraph.co.uk/news/world/china-watch/business/chengdu-infrastructure-development/ 58 https://www.telegraph.co.uk/news/world/china-watch/business/chengdu-infrastructure-development/ 59 Financial Times, “Chengdu benefits from China’s One Belt, One Road strategy", www.ft.com/content/b743706e-2d70-

11e6-bf8d-26294ad519fc 60 CBBC, “Belt and Road Initiative – Southern Routes, UK-China Cooperation and Opportunities” p39-41 61 CBBC, “Belt and Road Initiative – Southern Routes, UK-China Cooperation and Opportunities” p39-41

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Yunnan Province, including oil and gas pipelines from Kyaukphyu in Myanmar to Kunming (Kyauk Phyu

Special Economic Zone (“SEZ”) Deep-Sea Port).62

3.3. South and South East

3.3.1. Hainan Province

Hainan, China's southernmost province and an island in the South China Sea, is ideally positioned to be a

gateway for the BRI. In 2018, President Xi Jinping announced that the entire island, spanning 35,400km2,

would become a Free Trade Zone by 2020 and that a Free Trade Port would be established in the province by

2025.63 This, along with new flight routes, has strengthened the Hainan Province’s connections with ASEAN

and other BRI countries. Hainan Province’s already healthy tourist industry is growing rapidly, with 76

million Chinese and international tourists visiting in 2018, up 11.8% on 2017.64 Plans to build a 1,040km

highway loop around the island, together with 50 world-class tourist stations, and recent approval from the

Ministry of Culture and Tourism to establish all-night entertainment venues, will further boost this

bourgeoning industry.65 In 2017, China's first “international medical tourism hub” was launched in Hainan

Province, with preferential policies including lowered import tariffs on medical equipment and drugs and

allowing foreign investors to open hospitals on the island.66 These developments will provide opportunities for

EU enterprises.

3.3.2. Fujian Province

Fujian is a strategically located province on China's eastern seaboard. BRI plans for Fujian Province include

maritime links in all directions including Southeast Asia, the South Pacific, and Australia, as well as Northeast

Asia and North America. The province maintains Free Trade Zones in the port cities of Xiamen, Pingtan, and

Fuzhou, and has developed a logistics hub and export processing area at Xiamen Haicang Port, with railway

connections to Europe as well as maritime links to the wider world. A total of 175 trains have travelled

between Xiamen and European countries under the BRI framework, and the city has opened 56 maritime

freight routes.67 In 2018, bilateral trade between Fujian Province and economies along the Maritime Silk Road

reached RMB 394.6 billion (EUR 52.5 billion), an increase of nearly 11% on 2017, and customs officials have

stated that the BRI has served as a new engine of economic growth in the province.68 Fujian officials have also

signed an MoU with a region of Czechia to help foster cooperation between the province and central and

eastern European countries.69 The construction of a new airport in Xiamen, expected to open in 2020, will

open up new air routes as Fujian Province looks to cement its position as a regional transport hub for travel to

Southeast Asia.

3.3.3. Guangdong Province

The Guangdong provincial government established the Guangdong Silk Road fund, worth RMB 20 billion, in

collaboration with the Bank of China, the Industrial and Commercial Bank of China, and the Bank of

62 http://www.ecns.cn/news/2019-02-24/detail-ifzevinw9627423.shtml 63 http://www.xinhuanet.com/english/2018-04/14/c_137109412.htm 64 https://www.ecns.cn/news/society/2019-03-21/detail-ifzfsfwt8636830.shtml 65 http://www.ecns.cn/news/economy/2019-03-18/detail-ifzfmzhu2192712.shtml

See also: http://www.ecns.cn/news/2019-03-16/detail-ifzfmzhu2192245.shtml 66http://www.bjreview.com/Special_Reports/2018/2018_in_Retrospect/Top_10_Business_News_Stories/201812/t201812

17_800151659.html 67 http://www.ecns.cn/news/2019-03-11/detail-ifzffurh3759033.shtml 68 http://www.ecns.cn/business/2019-03-15/detail-ifzfmzhu2190184.shtml

See also: http://www.ecns.cn/business/2019-03-15/detail-ifzfmzhu2190184.shtml 69 https://www.yicaiglobal.com/news/china%E2%80%99s-fujian-signs-belt-and-road-mou-czech-olomouc-region

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Communications.70 The province's transportation links with ASEAN countries, as well as with the South

Pacific and North America, are bolstered by its close relationship with Hong Kong SAR. Additionally,

Guangdong Province will intensify cooperation under the BRI framework as it presses ahead with developing

the Guangdong-Hong Kong-Macau Greater Bay Area, the world's most concentrated port cluster and what

some have described as the Silicon Valley of the east.71 The province’s involvement in overseas projects is

varied, and companies across a range of sectors including energy, advanced manufacturing, and finance and

logistics, have invested overseas in BRI countries.72

3.3.4. Guangxi Province

Guangxi shares a land border with Vietnam and has a long coast on the Beibu Gulf. Border Economic

Cooperation Zones in Dongxing, Hekou, and Pingxiang and the cross-border labour service cooperation mean

there are now over 100,000 Vietnamese workers in these zones, boosting trade and relieving local labour-

shortages. 73 The New International Land-Sea Trade Corridor, a key BRI effort between eight Chinese

provinces and ASEAN to offer faster and cheaper freight, was launched in January 2019. Guangxi Province's

ports on the Beibu Gulf play a key role in this, allowing freight to reach ports in Singapore and other ASEAN

countries, as well as linking the China-Europe freight trains that depart from many western Chinese cities

before heading for Central Asia, South Asia, and Europe.74 Companies from Yunnan, Province Sichuan

Province, Chongqing, and Guizhou Province exported products worth RMB 21.4 billion (EUR 2.8 billion) via

Guangxi in 2018, up 62% from 2017.75 Nanning, the provincial capital, is host to the annual China-ASEAN

Information Harbour Forum, which aims to further the goals of the “Digital Silk Road” and facilitate dialogue

about digital connectivity.76 By June 2018, Guangxi companies had invested in more than 80 countries

(including over 20 companies investing in constructing factories in Indonesia alone).77

3.3.5. Jiangsu Province

Jiangsu Province has the opportunity to become an important economic player due to the opportunities that the

BRI presents. Key industries in the province include electronics, telecommunications, chemicals, machinery

and equipment, textiles and garments, and metallurgy. The province also boasts a rapidly growing service

sector. It hopes to play a supporting role in the New Eurasian Land Bridge by speeding up the construction of

a shipping and logistics centre in Nanjing, the provincial capital, as well as by expanding its marine economy

and financial sectors.78 Authorities also plan to guide enterprises in the textile, petrochemical, metallurgical,

construction and energy equipment industries to build production bases in Southeast Asia, Central Asia, and

Africa, opening up new markets. With cities like Nanjing, Lianyungang, and Suzhou, Jiangsu Province is a

key part of the Yangtze River Delta.

70 http://www.utrustfund.com/ywjsES/index_76.html 71 http://www.ecns.cn/news/economy/2019-02-18/detail-ifzeratr8870800.shtml 72 State Council Information Office, “China's Guangxi aims to be pathway to ASEAN”,

www.scio.gov.cn/32618/Document/1478866/1478866.htm 73 http://www.ndrc.gov.cn/gzdt/201803/W020180305343905091544.pdf

See also: http://www.ecns.cn/news/society/2018-12-08/detail-ifzanuxq9376836.shtml 74 http://www.ecns.cn/news/society/2018-12-08/detail-ifzanuxq9376836.shtml

See also: http://www.xinhuanet.com/english/2019-01/07/c_137726678.htm 75 https://www.beltandroad.news/2019/02/16/guangxi-asserts-role-as-belt-road-portal/ 76 http://www.chinadaily.com.cn/business/informationharbor/2015-09/14/content_21852177.htm 77 http://www.ecns.cn/news/society/2018-12-08/detail-ifzanuxq9376836.shtml 78 Ministry of Commerce of the PRC, 江苏八大领域对接“一带一路”

www.mofcom.gov.cn/article/resume/n/201505/20150500971344.shtml

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3.3.6. Zhejiang Province

Zhejiang Province, like Jiangsu Province, is also located in the Yangtze River Delta area, and is home to

several important sea-ports including Ningbo-Zhoushan Port, one of the busiest in the world. This province

includes key cities like Wenzhou and Hangzhou, both of which are among the fastest growing in China and

stand to benefit from BRI projects. For example, Hangzhou will host the Silk Road International Association

which provides financial services for BRI projects. This association will help Zhejiang companies in particular

with financing.79 Zhejiang Province will work with Singapore to explore BRI opportunities and further

cooperation in urban solutions and innovation.80 Figures released by Hangzhou Customs show that trade

between Zhejiang Province and BRI countries in 2018 was worth RMB 896.66 billion (EUR 119.2 billion),

12.3% higher than in 2017, and accounting for over 10% of China’s overall trade with BRI countries.

79 E-Zhejiang, “Hangzhou to be home of key Belt and Road organizations” www.ezhejiang.gov.cn/2017-

06/22/c_82587.htm 80 https://www.straitstimes.com/asia/east-asia/singapore-and-zhejiang-to-cooperate-on-belt-and-road-opportunities

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4. Key BRI Sectors

As Chinese companies move outside their borders to form the BRI routes, their operations can be

supplemented and supported in a number of areas where EU businesses have a lot to offer. The immediate key

sectors are infrastructure, energy, built environment, structured finance, agriculture and environment, and E-

commerce and logistics. Further opportunities also exist in the fishing, food processing, light equipment

manufacturing, education, tourism, and consumer sectors. Until recently, Chinese outbound investment had

been limited to large infrastructure projects and was mostly undertaken by large SOEs. However, recently

some smaller Chinese SOEs and privately-owned companies have also begun to venture into the international

arena. As plans for future projects unfold, some Chinese companies have begun to plan and develop strategic

manufacturing facilities in BRI countries.

Opportunities for EU businesses lie in areas such as early stage development of projects, advisory services,

and the subcontracting of specialised supplies or services. There is also a trickle-down effect which will

increasingly result in a need for small to medium-sized projects, which Chinese companies tend to be less

suited for. It is in these projects and sectors that private capital and EU SMEs will be able to add the most

value and play an increasing role.

4.1. Infrastructure, Energy, and Built Environment

4.1.1. Physical and Digital Infrastructure

As far as China is concerned, with its investment-led economy, large physical and digital infrastructure

projects under the BRI can go a long way towards facilitating the Chinese economy’s transition to slower but

sustainable growth and enhancing global connectivity. In turn, China’s investment in infrastructure along the

BRI over the last six to 10 years has helped those countries to accelerate their economic growth, creating new

markets as living standards improve.81 Indeed, it is predicted that over the course of 2019, trade between

China and BRI countries will increase by EUR 105 billion.82 Apart from highways, railways, and fibre optic

cables, the focus of infrastructure investment along the BRI is oil and gas pipelines, as well as electricity

transmission/distribution networks, supply chains manufacturing facilities in third countries, water and waste

management projects, regional trade and logistics centres, and urbanisation projects.83 The further economic

development of BRI countries, together with the internationalisation of investment flows and practices, is

expected to open a wide array of areas for EU SMEs to explore. This is a direct result of the gradual

internationalisation and standardisation of procedures, regulations, laws, and quality standards - areas in which

many EU companies have considerable experience.

4.1.2. Energy, Renewables, and Resources

Arguably, the BRI’s priority is on securing access to energy and resources, and as such more than half of

infrastructure investment along the Economic Corridors is focused on energy projects and resource extraction.

This includes power generation, capacity, transmission, and distribution networks, as well as preparation costs

in design and risk management. With China’s commitment to the Paris Climate Accords, there are likely to be

increasing opportunities for EU SMEs in the renewable energy sector. China’s commitment is shown

domestically by the substantial reduction in its usage coal-fired power stations at all stages of development,

reducing permitted new coal capacity to 5GW.84 Along the BRI however, China is supporting large scale

increases in coal capacity which need to be addressed and may present some opportunities for EU companies

81 https://eng.yidaiyilu.gov.cn/ghsl/wksl/79910.htm 82 Ibid. 83 CBBC, “Belt and Road Initiative – Southern Routes, UK-China Cooperation and Opportunities” p14-19 84 https://endcoal.org/wp-content/uploads/2019/03/BoomAndBust_2019_r6.pdf

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with expertise in the European clean coal market. Meanwhile, China has built up capacity in hydro-electricity

and is ambitious about its civil nuclear capabilities; these have also been supported along the BRI with hydro-

electric projects planned in Myanmar and Laos. Furthermore, investments in solar power have been strong.

Indeed, in April 2018 Shanghai Electric signed an agreement with Dubai authorities which represented the

single largest concentrated solar power project worldwide, with the project expected to generate 700MW of

power for a EUR 2.6 billion outlay. This represents a clear statement of intent to develop China’s capacity in

the green energy sector.85 As a whole, these developments mean that China is expected to account for a third

of the world’s total wind, solar, and hydroelectric power generation capacity by 2021.86 Though China is the

biggest single investor in clean energy, there are still areas in which the country will depend on international

cooperation and expertise that can enable China to further green its BRI processes, enhance its skillsets, and

deliver projects.87 Areas for possible cooperation include oil and gas exploration and supply, coal and nuclear

power generation, renewable energy projects, clean energy frameworks, and carbon trading platforms.88 As

mentioned earlier, the EBRD has proven to be fully behind sustainable energy projects on its periphery. For

example, in Ukraine EUR 250 million of investment has been directed into sustainable energy projects. Here,

too, there could be opportunities for EU SMEs seeking to play a part.89

4.1.3. Advanced Manufacturing and Transport

As China looks to construct modern, sustainable infrastructure along the BRI, opportunities will arise in the

manufacturing sector for foreign enterprises. Currently, Chinese equipment manufacturers are exporting to

BRI markets, while SOEs go abroad and take their supply chains with them. Large-scale infrastructure

projects, such as the construction of high-speed railways, ports, airports, hydro-power plants, and high-tech

industrial parks will require high-end equipment, much of which China will seek from suppliers abroad,

particularly where environmental or safety standards are high.90

In the transportation sector, there are a number of areas which may yield significant benefits and open up fresh

opportunities. First, despite a 3.5% contraction in the China market in 2018, the EU has maintained a strong

position in the automobile sector, with 53% of Chinese car imports emanating from the EU and a quarter of

cars manufactured in China being fulfilled by EU-owned companies. 91 Second, in May 2018, China’s

membership of the Transports Internationaux Routiers (“TIR”, “International Road Transport” in English)

convention could increase trade with countries along the BRI by up to EUR 12 billion. This is an important

policy breakthrough in trade facilitation, one which also supports the hard infrastructure projects that form the

Economic Corridors.92 Finally, China’s aviation industry is set to receive a significant boost in the second half

of 2019 with the opening of the new Beijing Daxing International Airport, which will not only present

opportunities for tourism companies, but could also spur further improvement in the currently under-

developed airfreight sector.93 In summary, while the automobile industry may seem out of reach to EU SMEs,

it highlights the vibrancy of China and the EU’s two-way trade. Furthermore, the expansion of trade

85 The Economist Intelligence Unit, http://country.eiu.com/article.aspx?articleid=626742246 86 CBBC, http://focus.cbbc.org/focus#features/the_silk_road_paves_the_way_for_green_tech 87 Ibid. 88 CBBC, “Belt and Road Initiative – Southern Routes, UK-China Cooperation and Opportunities” p20-21 89 The EBRD, https://www.ebrd.com/news/2019/ebrd-supports-largest-windfarm-in-ukraine-.html 90 Baker & McKenzie, www.bakermckenzie.com/-/media/files/insight/publications/2017/10/belt-

road/baker_mckenzie_belt_road_report_2017.pdf?la=en 91 European Automobile Manufacturers Association, https://www.acea.be/news/article/why-chinese-and-european-auto-

manufacturers-need-to-work-more-closely-toget

See also: https://www.acea.be/news/article/fact-sheet-eu-china-automobile-trade 92 Forbes, https://www.forbes.com/sites/wadeshepard/2018/05/31/how-chinas-belt-and-road-just-got-a-big-boost-from-

europes-tir-convention/#18ed78582517 93 Forbes, https://www.forbes.com/sites/outofasia/2018/01/10/beijings-new-daxing-international-airport-set-to-be-worlds-

largest-but-business-aviation-an-afterthought/#560cce2468ef

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facilitation along air and road routes has the potential to greatly enhance market access for EU companies

seeking to enter the market.

4.2. Structured Finance

4.2.1. Financial and Professional Services

With investment in the BRI predicted to reach USD 8 trillion (EUR 7.2 trillion) by 2049, it is unlikely that

Chinese state reserves, distributed through policy banks, will be sufficient to meet the challenges of the BRI.94

As such the provision of financial services by the private sector will become imperative. According to

Standard Chartered, this brings two key advantages to the BRI. First, private capital serves to validate projects

through rigorous due diligence, risk management, and other processes. Second, the inclusion of private capital

necessitates transparent regulatory and legal frameworks.95 In this sector, EU SMEs are well positioned to

utilise their skills, experience, and expertise necessary in the operations of Chinese companies as they seek to

take on a more prominent role in international trade. The membership of many EU countries in the AIIB,

Asian Development Bank (“ADB”) and other international financial institutions will provide greater access to

long-term capital and a more liquid and diverse financial market, which will require expertise in complex

financial tools.

As the BRI progresses and the Economic Corridors take shape, further opportunities will arise in other areas,

such as risk management and insurance services, commodity trading platforms, RMB internationalisation,

bond markets, asset management, legal services, accounting, consulting and advisory services, and maritime

services.96

4.2.2. Greening the BRI

Creating a more sustainable BRI is one of the core considerations for countries along the route. Indeed, as

investors focus their minds on sustainability, they will also need to consider ways to guarantee that the spirit

of a sustainable future is matched by action. One of the key methods to achieve this is green financing. Banks

such as HSBC have led the way in this regard, by pushing for greater access to technology in the energy sector

along the BRI in order to allow developing countries to leap-frog high carbon development pathways.97 One

key method of ensuring climate-resilient solutions is through internationally accredited green bonds, which

ensure open and transparent communication from bidding through to completion, and ensure that 95% of a

project’s finances are directed towards sustainable projects.98 The use of these green bonds can have a positive

effect on the broader transparency of the BRI too. Indeed, in December 2018 China announced plans to

exclude clean coal from its green bonds, which illustrates the increasing effectiveness of the green bond

market. Furthermore, the People’s Bank of China also believes that green financing will serve as a “key pillar”

of the BRI’s success.99 Further subscription to the idea of green bonds would allow the ambitions of the BRI

to be complementary to the sustainability goals of the international finance community, and the EBRD’s

financing of sustainable projects through its Small Business Initiative adds to these opportunities. For

example, in Ukraine, a key BRI country, the EBRD recently made EUR 250 million available for sustainable

energy projects. Though not an official financier of the BRI, the EBRD’s extensive investment in sustainable

energy projects along the BRI is mainly provided by the private sector and it can be seen that the large SOEs

are increasingly looking to smaller, private companies to handle more specialised projects.

94 http://www.ejinsight.com/20160412-getting-lost-one-belt-one-road/ 95 CBBC, “Belt and Road Initiative: A Guide to UK Services” pp.14-18 96 CBBC, “Belt and Road Initiative – Southern Routes, UK-China Cooperation and Opportunities” pp.8-10 97 CBBC, “Belt and Road Initiative: A Guide to UK Services” pp.18-20. 98 Brink News, http://www.brinknews.com/asia/can-the-belt-and-road-initiative-be-green/ 99 Ibid.

See also: http://www.ejinsight.com/20160412-getting-lost-one-belt-one-road/

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4.3. Agriculture and Environment

The EU is known worldwide for its excellent food quality and safety standards, hence this is an area which

could be considered a core competency of EU SMEs in this industry. As part of the Chinese government’s

broader strategy to improve its food security, investments in agricultural infrastructure are planned along the

Belt and Road, particularly in developing countries. Furthermore, as standards of living continue to rise in

China and along the Silk Roads, so too will the demand for high-quality sustainable produce, thus a desire to

gain relevant expertise, which agricultural businesses in the EU can provide. With trade in agri-business

between China and the EU increasing at over 20% yearly since 2007, there is significant scope for market

growth.100 The expansion of the BRI’s Economic Corridors more widely presents opportunities by improving

routes to market, especially with China’s accession to the TIR. EU SMEs in this industry should therefore

remain aware of the changing situation. In general, environmental protection and sustainability are high on

China’s BRI agenda and that of the EU, as shown throughout this report, and so the opportunity trend-lines

look set to only increase.

4.4. E-commerce and Logistics

China’s E-commerce market is among the most vibrant and innovative on the planet, and is quickly

transitioning into a “new retail” environment, which seeks to deeply integrate traditional offline platforms

with newer online retail processes. Prominent E-commerce company Alibaba has already achieved this

through its purchase of a number of offline retail stores, and start-ups such as Pinduoduo have captured large

parts of the Chinese market, particularly in China’s less developed regions.101 In recent years, E-commerce

has opened up new platforms for both B2B and B2C transactions.

One of the key developments as part of this is the rise of WeChat mini-programmes within the Tencent eco-

system. This has the effect of turning WeChat, which is ostensibly a social platform, into a thriving E-

commerce space. These platforms present clear opportunities for EU SMEs which lack the resources of big

multinationals: the cost of creating a mini-programme can be up to 80% cheaper than other market entry

options and allows instant access to China’s one billion-strong global user base, which is only set to increase

in number as infrastructure associated with the BRI takes shape and the aims of the Digital Silk Road start to

be fulfilled.102 For EU SMEs in the retail space, the creation of mini-programmes offers a great opportunity

for low-cost, low-risk entry into the Chinese market, and as time progresses will pay dividends along the Belt

and Road too.103

Indeed, with Chinese E-commerce sales set to be worth over EUR 80 billion by 2020,104 this market offers an

opportunity for BRI countries to take advantage of the increasing presence of China’s technological

capabilities, financial resources, logistical infrastructure, and E-commerce expertise, in order to develop their

own E-commerce markets.

There have been a number of changes to the regulatory environment of China’s E-commerce sector, which

have been welcomed by many industry leaders. The timing of the new laws is important as E-commerce is

expected to account for 33.6% of all retail sales in 2019, up from 23.8% in 2017.105 For those concerned about

intellectual property theft, a new law has strengthened protections and introduced tougher registration

100 https://ec.europa.eu/agriculture/sites/agriculture/files/trade-analysis/statistics/outside-eu/countries/agrifood-

china_en.pdf

https://ec.europa.eu/agriculture/sites/agriculture/files/bilateral-relations/pdf/asean_en.pdf 101 http://focus.cbbc.org/focus#features/the_rise_of_new_retail 102 http://focus.cbbc.org/focus#features/the_rise_of_wechat_mini_programs 103 People’s Daily, Cross-border E-commerce http://en.people.cn/ 104 www.businesstimes.com.sg/hub/futurechina-global-forum/from-silk-road-trade-to-belt-and-road-e-commerce 105 https://www.china-briefing.com/news/china-new-e-commerce-law-businesses-ready-new-compliance-norms-2019/

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requirements and harsher punishments to deter infringement. There are also measures which tackle unfair

competition and strengthen consumer rights. Furthermore, E-commerce platforms must now share joint

liability with sellers for the sale of fake goods on their site, with penalties of up to USD 30 million (EUR 26.9

million) for infringement.

Within the logistics market, China has seen large improvements in its own logistics systems over the past

decade and is now looking to spread these advances further afield, thereby increasing connectivity in western

and more rural areas of China, as well as along the external BRI routes. These newly-created transnational

corridors and networks are set to increase the movement of goods, commodities, and people. Such “macro-

flows” will need to be facilitated by efficient logistics centres which will, in turn, need to be supported by

appropriate management and infrastructure, such as warehouses, electricity interconnectors, rail network

coordination centres, and sea port management.

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5. Conclusion

The BRI offers significant opportunities in China, and also in many other countries and across numerous

business sectors. It is important, however, when considering the BRI, to realise that it is an initiative made up

of many different routes, each of which has its own amenities, features, and history. Furthermore, within

China itself the BRI covers many provinces, each of which approaches the initiative in a different way,

depending on the requirements of the local economy. Given the scale of the BRI, there are also unique

situations and requirements found across the sectors it covers, all of which must be considered in combination

with the available routes and Chinese provinces. It is also important to note that, from an economic and

political perspective, the BRI operates in a diverse range of countries, meaning that companies face the same

risks, such as legal and financial challenges, sometimes seen when accessing such foreign markets.

For EU SMEs wanting to participate in, and benefit from, the development of the BRI, it is key to prepare

sufficiently by identifying appropriate countries, Chines provinces, sectors, projects, and Chinese partner as

early as possible. Careful planning and due diligence beforehand will help EU SMEs take advantage of the

BRI in the most effective way possible and minimise the risks of operating in such a diverse and rapidly-

changing economic area.

As BRI projects further progress and mature, a trickle-down effect will result in more small-to-medium sized

projects, followed by the types of opportunities afforded by significantly improved logistics and increased

access to new markets. Furthermore, with the involvement of European banks in BRI countries, such as the

EBRD, alongside greater engagement by EU countries, new opportunities are likely to develop, and EU SMEs

should also be alert to these openings as they emerge.

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About the Centre

The EU SME Centre helps EU SMEs prepare to do business in China, by providing them with a range of

information, advice, training and support services. Established in October 2010 and funded by the European

Union, the Centre has entered its second phase which will run until July 2018.

The Centre is implemented by a consortium of six partners – the China-Britain Business Council, the Benelux

Chamber of Commerce, the China-Italy Chamber of Commerce, the French Chamber of Commerce in China,

the Eurochambres, and the European Union Chamber of Commerce in China. All services are available on the

Centre’s website after registration, please visit: www.eusmecentre.org.cn.

About CBBC

This report is compiled in partnership with the China-Britain Business Council (“CBBC”) and is an

introduction to Chinese economics. It aims to help EU SMEs gain an understanding of the different BRI

programmes and how EU SMEs can take advantage of these programmes in a cost-efficient way.

CBBC is the leading organisation helping UK companies grow and develop their business in China. CBBC

delivers a range of practical services, including: advice and consultancy, market research, event management,

an overseas market introduction service, trade missions and exhibitions, and setting up rep offices. For more

information about what CBBC can do to help your business develop in China, please visit: www.cbbc.org.

Contact the Centre at

Room 910, Sunflower Tower - 37 Maizidian West Street

Chaoyang District - Beijing, 100125

T: +86 10 8527 5300; F: +86 10 8527 5093

www.eusmecentre.org.cn; info@eusmecentre.org.cn

The EU SME Centre is an initiative implemented with the financial support of the European Union

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© EU SME Centre

EU SME Centre

Room 910, Sunflower Tower

37 Maizidian West Street

Chaoyang District, Beijing, 100125

China

Phone: +86 10 8527 5300

Email: info@eusmecentre.org.cn

Website: www.eusmecentre.org.cn