China hits speed bump on New Silk Road

FT: President Xi Jinping prepares to welcome 28 heads of state to conference in Beijing this week dedicated to his signature One Belt One Road (OBOR) initiative – his ‘soft power’ attempt to create a network of roads, railways, ports, power plants and fuel pipelines connecting China with south-east and central Asia, the Middle East, Africa and Europe – it has emerged that FDI from China to countries along the so-called New Silk Road fell by 2% year on year in 2016 and, according to commerce ministry data, has dropped by a further 18% so far in 2017. 

The decline has occurred despite a 40% jump in outbound FDI in 2016, which raised overseas investment to a record high and prompted regulators to clamp down on foreign deals in a bid to curb capital outflow.

Xiao Yaqing, chairman of the State-owned Assets Supervision and Administration Commission, which oversees state-owned enterprises, this week dismissed the dip as an anomaly in a long-term upward curve. “Big investments, especially overseas, mean that the numbers might not rise every year,” he said. “Let’s not look at year-on-year growth but at the development of the investment and the projects themselves. Over the long term, I believe investment into OBOR countries will rise.” He also disclosed that 47 central government-owned SOEs were involved in 1,676 projects in OBOR countries

Sceptics point out, however, that the geographic distribution of OBOR-linked FDI raises doubts about how much of that investment actually flowed into infrastructure; the leading investment destination in 2016 was Singapore, a high-income country with its own well-developed built environment. Eurasian Business Briefing