The Rise of China

April 21, 2021

China’s One Belt One Road initiative (OBOR) is one of the most ambitious infrastructure projects in modern times, seeking to realize a geo-economic vision of a modern silk road between Asia, Europe, and Africa.

By funding new infrastructure projects, both physical and digital, China seeks to enhance its politico-economic relationship with partner nations while ushering in a shared prosperity via increased regional connectivity.

The background of the OBOR initiative

Launched in 2013, OBOR is an ambitious initiative by President Xi Jinping to enhance and further the relationship China has with other nations. With the officially stated goal of stimulating growth and economic trade between nations to further a “collective prosperity”, China aims to fulfil 5 key goals:

  • Policy Coordination
  • Facilities Connectivity
  • Unimpeded Trade
  • Financial Integration
  • People to People Bonds

The program initially provided developing nations with vital funds to develop key infrastructure necessary to facilitate economic development. While the time horizon of infrastructure projects is usually best judged within 10-15 years, OBOR has already generated steady returns for investors.

The current scope of OBOR

At its heart, the program is tasked with the development of new infrastructure to facilitate economic trade and further China’s relationships with partner nations. The program to date is investing in nearly 2/3 of the world’s nations to achieve such goals.

This is accomplished through the two main corridors with which the program is concerned with: The Silk Road economic belt and a Maritime trading route. Among these trading routes are 6 economic corridors:

  • The New Eurasian Land Bridge, which connects Western China to Western Russia
  • The China-Mongolia-Russia Corridor, which connects Northern China to Eastern Russia via Mongolia
  • The China-Central Asia-West Asia Corridor, which connects Western China to Turkey via Central and West Asia
  • The China-Indochina Peninsula Corridor, which connects Southern China to Singapore via Indo-China
  • The China-Pakistan Corridor, which connects South Western China through Pakistan to Arabian sea routes
  • The Bangladesh-China-India-Myanmar Corridor, which connects Southern China to India via Bangladesh and Myanmar

In principle, the plan extends far beyond just economic links. There are also political motives to strengthen foreign relations between China and other Asian, African, and European nations.

OBOR is already impacting markets

Within the subsequent 5 years from inception, OBOR related infrastructure projects have yielded clear short term gains for Chinese and international firms involved as evidenced by the increased construction volume undertaken by these firms along with economic returns from completed OBOR projects.

With the expansion of the program to encompass nearly 2/3 of the world’s nations, a number of key industries and sectors are poised to grow over the massive investments China is undertaking. Chief among them is construction and infrastructure related firms, as the bulk of the program’s funding is being driven to developing physical infrastructure systems to achieve the stated goals. However, another key industry set to grow is the Chinese tech industry, as OBOR is also seeking to drive innovation on a digital front.

The digital dimensions of OBOR (Digital Silk Road)

Part of the OBOR Initiative is the digital dimension called, the Digital Silk Road. As noted by Deloitte, the total program is estimated to cost nearly USD 200 billion, China has invested an estimated USD 79 billion into projects to foster interconnectivity between partner nations through the establishment and/or upgrading of internet connections via new fiber optic cables, 5G networks, satellites, and other devices.

The program also encompasses the development of cutting-edge technology such as quantum computing, nanotechnology, AI, big data, and cloud storage that poise China to become the leading innovator and filer of patents in the world. As a result, Chinese tech firms associated with these new innovations are poised to grow on the continued government support and early adoption of key technologies (e.g. 5G development, fiber optic technology, etc.).

OBOR is set to expand

With the steady influx of capital and continued commitment by China, OBOR is proving to be a promising initiative to drive economic growth within member nations. With the program expanding to include more nations than just the developing world (already including Italy and potentially another G7 nation with Japan), analysts have estimated that the OBOR has already generated nearly USD 117 billion in trade and is continuing to generate returns for partner nations and companies. With an estimated total cost of up to USD 1.3 trillion, the program is poised to continue being a major driver of growth in participating nations.

Investing in OBOR can be challenging

With OBOR projects being poised to become more international and inclusive, as the Chinese government seeks to increase private-sector involvement, there comes more opportunities for investors to capitalise on the growth this ambitious program may propound.

However, given the complexities of investing in an ambitious international geo-economic project that spans over 60 different nations, it can be difficult to begin investing in this project. Investors will have a myriad of ways to begin investing from sovereign bonds of nations involved to stocks of participating firms.

Capitalise on OBOR Projects with Crea8

Crea8 has put together an investment strategy to take ensure you don’t miss out. The “One Belt and One Road” investment strategy lets you ride on this trend by investing in exchange traded funds (ETFs) that consist of stocks from countries and industries that are set to benefit from OBOR projects.

Amongst the ETFs in this strategy are the iShares MSCI Thailand ETF, iShares MSCI Malaysia ETF and the iShares S&P GSCI Commodity Indexed Trust. Stocks in these funds are set to benefit from the ‘China-Indochina Peninsular Corridor’. 

Further, the inclusion of the iShares MSCI China Small-Cap ETF captures the benefit flowing through to Chinese IT firms, amongst others, from the Digital Silk Road. 

Crea8’s OBOR strategy takes the hassle out of investing in stocks that will benefit from OBOR. With a diverse collection of ETFs in the strategy, you get to build your wealth through this theme via our Goal Based Investing Service.

Put your own spin on things

If you would like to add/drop ETFs from the strategy, Crea8 allows you to adopt our professionally built strategies, such as the “One Belt and One Road” theme and put your own spin on things. With Crea8’s Analytics, you can use our screener to identify other ETFs to add to the strategy.

Set up an investment plan that is adaptive

You can set up a personalised investment plan that is optimised to meet your personal goals. We give you access to the “One Belt One Road” theme as well as traditional assets to ensure that your investment plan is diversified for any market condition.

If your personal circumstances change, you can update your personalised plan and Crea8 will automatically adapt and revise your optimal portfolio.

We monitor your plan to ensure you can sleep easy

Your investment plan is rebalanced automatically, or we will send you a reminder to do so. This way, you can relax knowing that your investment plan is diversified and on track to meet your goals.

Crea8’s Advice

Selecting stocks to invest in megatrends such as the “One Belt and One Road” Initiative can be daunting.

Crea8 can help with this through our professionally built themes. Try it out today through our Goal Based investing service, including the functions to make it your own.

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