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The "One Belt One Road" Strategy and the Opportunities for Hong Kong to Stand Out


The “One Belt One Road” (OBOR) Programme is without a doubt the most ambitious initiative that China has launched since the founding of the Republic. Encompassing 65 countries in Asia, Europe and Africa, which collectively includes 4.4 billion people, the area covered by the OBOR claims a gross domestic product (GDP) of US$21 trillion.

This strategic plan announced by the President of the People’s Republic of China, Xi Jinping, in September 2013 is articulated around two corridors: The “Silk Road Economic Belt” – “The Belt”- and the “21st Century Maritime Silk Road” – “The Road”.

Xi’s ambition is to bring annual trade between China and countries along “the Belt” and “the Road” to US$2.5 trillion within a decade by promoting infrastructure development in the regions involved, establishing routes between China and Eurasia and creating new business opportunities.

The primary objective is to address Chinese overcapacity[1] by exploring new investment opportunities in less developed neighboring countries.

In this article, we attempt to depict the strategy adopted by China to, not only address its economy’s structural issues, but also to drastically expand its global footprint and reinforce its position as a world leader. We foresee that Hong Kong has golden opportunities and strategic advantages to be a key partner for China with the OBOR project.

A series of projects in China and beyond

OBOR will lead to the creation of new trading zones

As mentioned, one of the main objectives of OBOR is to tackle the problem of China’s overcapacity, by creating new trading zones and developing new export markets to boost its economy.

In China, “the Belt” connects the Northwest and the Southwest parts of the country while “The Road” connects the 3 major ports of Quanzhou, Guangzhou, and Ningbo and a number of feeder ports. Under the OBOR initiative, Midwest China will fully exploit the potential of its geographic locations in the Economic Belt of ‘the Modern Silk Road’, and transform from its current role as ending point of international logistics networks to important nodes, creating a primary driving force for regional economic development. It is clear that the initiative aims to change China’s regional development model by promoting holistic economic liberalization of “Road” and “Belt” areas, strengthening interconnection, and boosting regional synergies, rather than supporting the development of scattered liberalized cities and blocks as seen in the traditional approach.

OBOR has developed 6 economic corridors. This has triggered the necessity of launching a series of infrastructure related projects to connect the cities along the corridors. The multiplier effect of ongoing transportation infrastructure projects is already noticeable: Free Trade Areas along “the Belt” and “the Road” are being planned by relative provinces and regions[2].

The six economic corridors of OBOR

Source: China-British Business Council

Beijing will underwrite most of the development for infrastructure within other countries participating in the OBOR through China-led multilateral institutions and state-owned Chinese firms. Three financial institutions have been set to support the OBOR projects.

The three financial institutions of OBOR

Source: AIIB/Silk Road Fund/NDB/Hong Kong Trade Development Council

OBOR will boost Chinese export and investment markets

The complementarity of China and “the Belt” and “the Road” countries brings out great potential for trade cooperation while adding a new growth point to China’s exportation. The growth rate of bilateral trade between China and countries involved in the initiative has increased significantly since 2014. China expects annual trade with “The Belt and Road” countries to be worth US$2.5 trillion within a decade – up from US$1 trillion in 2015.

China is making a major push to transform its production from manufacturing labour-intensive low-end goods toward hi-tech goods. The objective is to build up a trade industrial chain by exporting labour services, advanced equipment, technology and management through project contracting. Numerous economic and technical partnership opportunities exist in transportation, telecommunications, agriculture, chemicals, textiles, energy, finance, science and technology and others industries due to different comparative advantages across neighbouring countries.

Historically, China's overseas assets structure was not optimized, with a low level of net investment income. OBOR is an opportunity to bring The “Go Out” Policy initiated in 1999 by the Chinese government[3] to the next level, enabling China to improve the investment structure while expanding the scale of foreign investment to lay the foundation for future industrial transfers and digestion of excess capacity. In 2014, China, with foreign capital inflows of US$ 128 billion and foreign investment of US$140 billion, surpassed Japan to become Asia's largest foreign investor. According to estimates by Asian Development Bank, US$730 billion of infrastructure investment is demanded in Asia each year until 2020. China can help “the Belt and Road” countries break through the bottleneck of insufficient funding by increasing outward investment, while more effectively using accumulated foreign exchange reserves and higher returns from overseas investments.

Which opportunities for Hong Kong?

OBOR brings new opportunities to Hong Kong financial market and beyond

The funding required by OBOR initiatives is enormous while the national savings along “the Belt” and “the Road” are relatively low.

Overall, the OBOR initiative will require billions of infrastructure investment while most of the participating countries have underdeveloped domestic capital markets and less experience in practicing international financing approaches such as BOT (Build-Operate-Transfer), making financing of the projects a critical issue.

Asia’s need for national infrastructure investment is estimated to be about US$8.22 trillion for the period 2010–2020 while AIIB has US$100 billion of capital and the Silk Road infrastructure fund has US$40 billion.

Considering that current direct investment and financing policies are far from sufficient to support the large scale Infrastructure investments required under the OBOR initiative, there may be some opportunities for advanced economy with developed banking industries to play a major role by helping to raise funds via issuing project loans, syndicated loans, and bonds to address the funding gap, creating co-financing opportunities with global and regional financial markets.

Hong Kong, as an international financial center, is well-positioned to provide some of the remaining funding requirements, as it can offer a wide spectrum of financial products and service expertise to support this. Moreover, this is an opportunity for Hong Kong to assume a more active role in offshore RMB business, financing, fund raising, asset management and insurance.

As of today, Hong Kong is regarded as the pioneer in RMB internationalization with the largest pool of offshore RMB funds in the world. Moreover, Renminbi trade settlement managed by Hong Kong last year came in at RMB 6.3 trillion – a jump of 60% over the previous year. Those are evidences that Hong Kong can provide Chinese enterprises and international investors with renminbi services ranging from cross-border trade settlement to bond issuance to finance the transportation networks and other infrastructure projects of OBOR.

Another key strategic advantage that Hong Kong banking industry has is related to commercial banking activities as the OBOR initiative provides a channel to connect key customers to relevant projects with the aim of capturing infrastructure financing opportunities, creating numerous business opportunities in this area. Hong Kong banking sector is more mature and innovative than its Asian counterparts (except Singapore) in developing trade finance related products, payment tools and methods to be able to keep up with changes in market initiatives and policies as the initiative progresses.

Besides the strength of its financial sector, Hong Kong is globally recognised as a centre of excellence in sectors such as brand design, marketing strategy, Sales, product development and design, financial and legal matters. As such, participating Chinese companies are eager to benefit from Hong Kong’s professional services support.

Moreover, from a geographical point of view, Hong Kong has a natural advantage to be a main player in the OBOR. Located at the center of the Asia-Pacific region, Hong Kong provides direct access to the maritime and aviation routes with a world-class airport connecting major cities in the region and worldwide.  In fact, 20% of the Mainland’s international trade is already handled by Hong Kong.

Hong Kong’s role recognised by Chinese leaders and supported by Hong Kong Monetary Authority (HKMA)

Chinese representatives have emphasised the role of Hong Kong in the OBOR project. In May 2016 during a visit to Hong Kong, Zhang Dejiang, the nation’s third-highest-ranking leader highlights Hong Kong’s role in the OBOR for the first time, stating “The central government ... holds the view that Hong Kong possesses a multitude of unique strengths in the development of One Belt, One Road, and is capable of performing such functions that are of high importance”. He suggested that Hong Kong would be a hub for financial accounting, legal services (for example, project finance and dispute resolution) and consultancy.

Following Zhang’s remarks, the Hong Kong Monetary Authority (HKMA) followed up by setting up an Infrastructure Financing Facilitation Office (IFFO) and signing a memoranda of understanding with both the International Finance Corporation and the Global Infrastructure Hub. The Global Infrastructure Hub is a non-profit organization that aims to increase the availability of investment-ready projects and help to match potential investors with appropriate projects. To date, a large number of organizations have joined its ranks including top players such as AIA Group, Citi Group and Mizuho Bank. This initiative has the objective to have Hong Kong act as a focal point for the financing of the OBOR projects. “Hong Kong could become a springboard for many Chinese companies expanding overseas and similarly, an attractive destination for overseas corporations wanting to gain a foothold in the mainland market,” said Vincent Lee, executive director of HKMA.


Being the super connector between the Mainland and the rest of the world, Hong Kong has definitely a trump card to play in the OBOR strategy.  OBOR will create huge opportunities for Hong Kong’s financial services industry as the city can serve as a fundraising hub, offshore renminbi hub and liquidity pool, asset management, logistics and transportation hub for global financing, trading and shipping for the OBOR initiatives. Partnering countries can also leverage world-class levels of legal, trading and risk management expertise.


[1] About Overcapacity, see article “Chinese banks dominance endangered by the rise of non-performing Loans” here

[2] Central Asian Free Trade Area, China – Gulf Cooperation Council (GCC) Free Trade Area Pilot Zone, China – Kazakhstan Lianyungang Free Trade Area have been proposed by Xinjiang, Ningxia and Lianyungang, respectively.

[3] See article “Open for business: The incredible expansion of Chinese banks overseas” published on Sia Partners financial blog here.

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