China’s One Belt, One Road initiative is a massive economic and diplomatic program created in 2013 that has the potential to transform international trade. The project consists of an economic land belt that links China to Europe through Central and Western Asia, as well as the enhancement of the Maritime Silk Road which connects China to Southeast Asia, Africa, and Europe. In total, the project intends to cover 65 countries over 3 continents.
The initiative, if successful, has the ability to completely change the trade environment of Eurasia. The road would cover 65% of the world’s population, 40% of the world’s GDP, and 20% of all the goods and services the moved in the world market (McKinsey & Company). In addition, it would encompass 75% of known world energy sources (South China Morning Post). However, the project’s size provokes questions in regard to its funding and execution.
Projected funds for the project are between $2 trillion and $3 trillion and require low-interest loans from willing investors. As the road runs through developing and emerging economies, some countries are unwilling to take the risk of investing in infrastructure. Despite this obstacle, the project has accumulated a great deal of funding through The Silk Road Fund, The New Development Bank, and The Asian Infrastructure Investment Bank (AIIB).
Already, The Silk Road Fund has backed a dam in Pakistan and a liquified natural gas operation in Russia (Bloomberg News). In August, Chinese President Xi JinPing announced China had made formal agreements with 30 countries, and 20 others are cooperating on other infrastructure plans. The AIIB currently has 6 approved projects underway and 2 proposed projects to support the initiative (Asian Infrastructure Investment Bank).
International trade is the backbone of our modern, commercial society. The One Belt, One Road initiative aims to accommodate globalization by making trade easier and more efficient. At Mercatura Global, we endeavor to do the same by assisting small- and medium-sized businesses to profitably enter international markets. If your company is looking to take advantage of the global market, contact Mercatura Global today.