The Belt and Road Initiative

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The belt and road meaning — commonly referred to as One Belt, One Road (OBOR) is a China-led effort to revive — and broaden — the ancient ‘Silk Road’ trading route that stretched from China, through Central Asia and the Middle East to the Mediterranean in Europe. The goal of the initiative is to invest in necessary infrastructure with the aim of promoting closer economic integration among member economies and boosting cross-border trade, economic growth, and development. The B&R includes both a land ‘belt’ and a maritime ‘road’ that encompasses most of Asia, parts of East Africa, and Europe.

There are currently an estimated 68 member states in total which, according to an interview by McKinsey, accounts for 65% world population, one-third of world GDP and a quarter of global cross-border trade. Projects which have been proposed or are already underway are valued at just under US$ 900 Billion, with China promising to invest approximately US$ 4 Trillion in OBOR countries, in total, though no clear timetable has been set.

How the Belt and Road Initiative Will Impact Businesses

With proposals including outlays for power plants, new and improved ports, airports, and thousands of kilometers of new road and rail links, the B&R will have a major impact on regional and global commerce. Different member countries — and the firms and consumers within — will benefit in different ways, depending on their specific circumstances.

Pakistan, for example (an enthusiastic supporter of OBOR), boasts a young and reasonably well-educated workforce; however, it suffers from regular power outages and insufficient transport links, both major hindrances to the development of a competitive manufacturing sector. Investment in a transportation corridor between Pakistan and China, along with new coal mines and hydroelectric power via the B&R Initiative promise to address these problems. If successful, Pakistan will be more closely integrated into Factory Asia — in which China is a core component, create more local jobs, deliver lower costs to consumers, and make the country a more attractive place for private investors and foreign manufacturers.

This represents just one prominent example of China’s strategy via the OBOR, focusing on countries in Central and Southern Asia where governments are in greater need of such investment and therefore more likely to be receptive and energetic partners. If successful, the OBOR will result in increased productivity, lower costs faced by producers and consumers, shorter shipping times, and increased economic growth and cross-border trade — to the benefit of countries inside and outside of the OBOR network.

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