China's ambitious plans to reshape global trade



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Martin Tricaud is Chief Executive Officer of HSBC Australia. Before assuming his current role in April 2017, he was President and Chief Executive Officer of HSBC Korea for four years, where he was responsible for all aspects of the Group’s operations in the country. Prior to that, he was Global Head of Multinationals for HSBC’s Global Banking and Markets from 2010-2013, leading and coordinating the coverage of multinational companies in more than 80 countries through HSBC’s global network. Mr Tricaud began his career in 1989 with Crédit Commercial de France, which was renamed HSBC France after becoming a wholly-owned entity of the HSBC Group in 2000.

China's Belt and Road Initiative provides opportunities for Australian businesses with expertise in infrastructure, writes Martin Tricaud. 

ASEAN is an economic powerhouse in the making that presents opportunities far beyond Asia itself, including to Australian companies seeking to participate in China’s ambitious plan to reshape global trade through its Belt and Road Initiative.

The Association of South-east Nations (ASEAN) – with its 10-members spanning countries as diverse as Singapore and Myanmar – has a combined GDP the size of the UK and 625 million people whose consumer spending is expected to hit US$2.3trillion by 2020.

Australia's two-way goods trade with ASEAN is already larger than that with the United States and its two-way services trade is second only to that with the EU.

The region has almost as much capacity to underpin Australia’s economic future as fast-growing China, particularly as Belt and Road will create modern transport links to allow goods and services to be transported faster and more efficiently between nations than ever before.

In fact, ASEAN provides a text-book example of the benefits that Belt and Road is likely to offer to Australian businesses that are able to provide the expertise necessary for the infrastructure projects that form the core of China’s plan.

China’s Belt and Road Initiative is a multi-faceted, multi-decade strategy aimed at boosting the flow of trade, capital and services between China and more than 65 other countries to its west and south.

The initiative will support the construction of more than 7000 kilometres of rail lines between China’s own borders and some of its largest ASEAN trade partners, including Laos, Cambodia, Thailand, Malaysia, Singapore and Indonesia.

Many of the projects have already started to take shape. The Thai government in August 2017 approved US$5.5 billion for the construction of a 252-kilometre line connecting Bangkok to its north-east border. And, in April, China and Indonesia agreed terms for building a high-speed rail link between Jakarta and Indonesia’s fourth largest city, Bandung.

More work is in the pipeline. Towards the end of 2017, the Singapore and Malaysian governments are expected to announce the tender arrangements for their respective legs of the US$15 billion 350-kilometre Kuala Lumpur to Singapore high-speed railway.

The joining up of the South-east Asian railway network will be a paradigm shift for the region. Apart from removing bottlenecks in the flow of goods between China and South-east Asia, it has the potential to increase intra-regional trade and shave the cost of doing business to an extent that will allow Australia to finally take full advantage of trade opportunities in the region.

While a large part of the contracting for the construction of these projects is likely to be awarded to Chinese entities, engineering firms from across the world are already active in ASEAN and capitalising on the new ventures.

Australian-based engineering firm John Holland is involved in the construction engineering and tunnelling services for Malaysia’s double tracking project. The Malaysian operation of British engineering firm Mott Macdonald is part of a three-party consortium providing project management support and technical advice on the Kuala Lumpur to Singapore high-speed rail.

Elsewhere, Canadian firm Bombardier Transportation signed a strategic partnership agreement with China Railway Rolling Stock Corporation (CRRC) in 2016 to produce train-sets for the multitude of projects that CRRC is involved in across ASEAN.

Apart from their investment into South-east Asia, each of these international firms have a swathe of suppliers and supply chain partners from their home markets that are being swept into supporting these projects.

The so-called ASEAN-5 countries alone – Indonesia, Malaysia, the Philippines, Singapore, and Thailand – are expected to expand by six times more than Australia’s economy in the years to 2035. The profound change that will come accompany this expansion will provide Australia with multiple opportunities to prolong its own uninterrupted 26-year period of economic growth.
 


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