Belt and Road Impacts on China's Overseas Infrastructure Investment Patterns
Wang Lin
/SOURCE : Yicai
Belt and Road Impacts on China's Overseas Infrastructure Investment Patterns

(Yicai Global) May 24 — China's overseas infrastructure investment patterns are undergoing notable changes. Chinese investments in the Belt and Road countries in Asia witness rapid growth, while infrastructure markets in Africa and Latin America are weak and grow slowly due to relatively sluggish economies.

The infrastructure industry's 2016-2017 annual report, released on May 22 in Beijing by China International Contractors Association, shows rapid business growth in countries along the Belt and Road, particularly those in Asia.

The report shows that in 2016 Chinese enterprises participated in the development of the Belt and Road markets, with the total new contracted projects amounting to USD126 billion in the whole year, accounting for 51.6 percent of the total newly-signed contracts during the same period in the industry, representing a year-on-year growth of 36 percent.

As at the end of 2016, China's foreign contracted projects have achieved a cumulative turnover of USD1.2 trillion and a new contract amount of USD1.7 trillion.

Benefiting from the "Belt and Road" initiative, Asia has become the fastest growing area in China's foreign contracted projects last year. The total value of Chinese companies' new contract projects in the continent hit USD122.67 billion in 2016, up 36.7 percent year-on-year, with a turnover of USD76.85 billion, an increase of 11.3 percent.

In 2016, among the top 10 markets Chinese firms signed new contracts, five are Belt and Road countries. Total value of contracts signed with three of them, namely, Pakistan, Malaysia and Indonesia, is worth more than USD10 billion, while contracts signed in six nations along the Belt and Road - Iran, Bangladesh, Laos, Iraq, the United Arab Emirates and Saudi Arabia, exceeded USD5 billion.

By contrast, Chinese companies have seen negative growth in foreign projects in Africa for the first time in nearly a decade, recording a 4.8 percent drop from a year earlier. However, the new contracts still rose by 7.6 percent.

The report argues that continuous fall in commodity prices, such as energy and metals, economic difficulties in some African countries, which shortened funds for infrastructure construction and caused reduction in new projects, as well as moratoriums, postponing and delays in project payments on the ongoing projects are all to blame for the negative trend in African continent. Moreover, sharp devaluation of some local currencies affected expectations concerning project revenues, shrinking the African infrastructure market over the past year.

Despite all that, Chinese companies have signed a number of petro-chemical, building and transportation projects in some African countries like Algeria, Egypt, Ethiopia and Kenya over the past year, the report indicated.

Similar to the situation in the African market, Latin American market also  continued to slump, with infrastructure market stagnating. The total value of Chinese companies' contracted projects recorded a 2.3 percent year-on-year decrease in the region last year.

The report notes that Venezuela and Ecuador are the traditional infrastructure markets for Chinese enterprises in Latin America, while Chinese companies have stepped up their efforts to develop more stable political and economic markets such as Bolivia, Panama and Mexico.

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Keywords: BELT AND ROAD , Southeast Asia , Africa , Latin America , Infrastructure Project , Investment