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Belt & Road: Manage risks with new opportunities

The numbers behind China’s epic Belt and Road Initiative are staggering. A new Refinitiv report examines close to US$4 trillion of work underway, the investment opportunities and how overseas firms can achieve proper due diligence on Belt and Road projects.

  1. There are nearly 3,000 Belt and Road projects underway with a combined value of around US$4 trillion and involving 2,630 companies.
  2. China is looking to support new investment in the Belt and Road Initiative by opening up more opportunities for non-Chinese companies.
  3. BRI Connect is a powerful app from Refinitiv that delivers trusted intelligence and insights into global Belt and Road investment opportunities.

In the six years since Chinese President Xi Jinping outlined his vision of reviving the fabled Silk Road, China’s epic Belt and Road Initiative (BRI) has become a major driver of global project activity.

According to our report — BRI Connect: An Initiative in Numbers — there are now 2,951 projects valued at US$3.87 trillion underway across the wider Silk Road region, involving 2,630 companies. In July 2019 alone, 84 new projects were unveiled with a combined value of $52.54 billion.

One driver for this uptick is increased state funding.

Morgan Stanley’s chief China economist Robin Xing estimates that China’s investment in Belt and Road countries will increase by 14 percent annually over the next two years, and that the total investment amount could double to $1.2-$1.3 trillion by 2027.

Yet, even this will not be enough to drive the next wave of development.

Based on findings from the Asian Development Bank, the total infrastructure investment requirement in Asian countries is expected to be $26 trillion over the next 15 years.

To close that gap, China is looking to support new investment, create new partnerships and facilitate new financing methods — all of which are likely to open up greater opportunities for organizations across the world.

Just over half of Belt and Road projects involve non-Chinese companies — but only six percent currently attract private investment.

A graph showing the most prominent project nations in China’s epic Belt and Road Initiative. Belt and Road projects: How to manage the risk
The most prominent project nations in China’s epic Belt and Road Initiative

The next wave

While the first wave of investments came from Chinese banks, the scale of development ahead makes it likely that non-Chinese financial services organizations will play a bigger role in the future.

Earlier this year, President Xi Jinping said: “We welcome the participation of multilateral and national financial institutions in BRI investment and financing and encourage third-market cooperation. With the involvement of multiple stakeholders, we can surely deliver benefits to all.”

This demand for third-party investment, particularly from the private sector, is also helping to ensure that Belt and Road projects conform to global standards of viability, transparency and governance.

This, in turn, makes them more attractive to investors. And opportunities may not be restricted to large global players, with innovative small to medium enterprises being encouraged to offer their services and products.

Risk management approach

The Belt and Road Initiative now covers a region that accounts for 30 percent of global GDP, 40 percent of global GDP growth and 44 percent of the world’s population. With the Chinese government looking to widen the net, how can organizations reap the benefits?

The first point is that, just as in any region, rewards come with risks. While foreign investors bring strong technical expertise to the table, they may lack local expertise.

Conducting detailed and holistic assessments before engaging in any new project is therefore critical, and, because risk changes over time, firms must also ensure that well-defined and ongoing risk monitoring processes are in place.

Risk and reward go hand-in-hand, but not fully appreciating the nature and extent of potential risks can be detrimental.

Due diligence on Belt and Road projects

The risks associated with doing business in unexplored and unknown territories span regulatory risk, financial crime and corruption risk as well as potential reputation risk.

That is why it is important to carry out proper due diligence on the Belt and Road projects and underlying companies behind them before engaging in business.

The market-leading Refinitiv World Check provides comprehensive, reliable and up-to-date risk intelligence data to facilitate the efficient screening of individuals and organizations before entering into any form of investment, partnership, or other business relationship.

The Country Risk Ranking tool allows firms to conduct a sophisticated risk analysis of any country or territory.

A chart showing the World-Check database from Refinitiv. Belt and Road projects: How to manage the risk
The World-Check database from Refinitiv

We have also developed BRI Connect, a powerful app that delivers trusted business intelligence and crucial insights into global Belt and Road investment opportunities and related organizations.

Country Risk Ranking data can be accessed within BRI Connect, enabling users to analyze the potential location-based risk of any project before investing, partnering or otherwise engaging with a foreign entity.

Belt and Road opportunities

Where heightened risk is detected, or suspected, our robust Enhanced Due Diligence reports include data on company ownership, operating and litigation history, key management and decision makers, prior business conduct, reputation history, hidden liabilities, and more.

As the opportunities presented by the Belt and Road Initiative continue to grow, some firms are held back by perceived country or counterparty risks.

Robust data and analysis can help you manage those risks, make informed decisions and take decisive action.

Refinitiv provides insight about China’s Belt and Road Initiative for global financial professionals, investors and asset managers