China paves a silk road for trade
Commodities Stephen Cauchi
619 words
30 Jul 2015
The Australian Financial Review
AFNR
English
The Silk Road might conjure images of Marco Polo and ancient Chinese empires, but its infrastructure-driven 21st century version could be a long-term saviour for commodity prices.
China's plan to spend billions of dollars on transportation links to Europe via western Asia - primarily railways and highways but also ports - is finally under way and starting to attract international attention.
"The Silk Road initiative announced by Chinese President Xi Jinping in 2013 and implemented, beginning this year, contemplates so vast an investment in highways, ports and railways that it will transform the ancient Silk Road into a ribbon of gold for the surrounding countries," Yale Professor Valerie Hansen, writing in The Indian Express earlier in July, said.
Professor Hansen wrote a book in 2012 called The Silk Road: A New History. Officially called The Silk Road Economic Belt and the 21st Century Maritime Silk Road, the project also goes by the title One Belt, One Road.
In December China committed $US40 billion ($54.49 billion) to the Silk Road's fund and the first project was unveiled in April. It was the $US1.65 billion Karot hydropower project in Pakistan, unveiled during Mr Jinping's state visit to Pakistan on April 21.
The project is a priority in the China-Pakistan Economic Corridor initiative, a planned network of roads, railways and energy projects linking south-west Pakistan's deepwater Gwadar Port with north-west China's Xinjiang Uygur autonomous region.
Singapore's former minister for foreign affairs George Yeo said at a Singapore forum last week that the One Belt, One Road policy would bring about a "complete reopening of Eurasia".
"If China can pull this off - and many countries want China to succeed because they need it - it's going to change the geoeconomic, geostrategic map of Asia," Mr Yeo told the FutureChina Global Forum 2015.
Part of China's motivation in doing so to was to "correct internal imbalances", making use of spare capacity for production of materials such as steel and concrete, which could easily be used to build infrastructure, he said.
Moody's Investors Service released a report last week, "China Credit: One Belt, One Road is credit positive, despite rising overseas risk exposure", that gave the project the thumbs up, while pointing out some shortcomings.
"Companies operating in industries such as steel, building materials, maritime transportation, power and construction will benefit most from the initiative, which will help develop new export outlets overseas," the report said. "The plan will also be credit positive for companies that use natural resources, such as oil and gas or agricultural players, as well as construction and railway companies."
Another benefit would be the internationalisation of the China's currency, the renminbi.
"The provision of intra-regional investment and lending will encourage greater international use of the renminbi, which is one of the government's stated economic reform objectives," Michael Taylor, a Moody's managing director and the chief credit officer for Asia Pacific, said.
However, the project was "unlikely to provide an ultimate solution to major oversupply - and resultant credit concerns - in industrial sectors such as steel, cement and mining, and would not be a panacea for many smaller companies in overcapacity industries that were under increased financial stress," Moody's said.
Furthermore, "the initiative will face various geopolitical and project financing risks, suggesting that it will take some years to gather traction", it said.
"The region will require significant additional funding from the private and public sector to realise the plan's infrastructure goals."
UBS commodities analyst Daniel Morgan agreed, saying the project had the potential to be "deployed on a grand scale".
Fairfax Media Management Pty Limited
Document AFNR000020150729eb7u0001x
(31-07-2015, 11:05 AM)greengiraffe Wrote: [ -> ]Our Comrades want our commitment with them for the long (wrong term). They are not welcoming short term traders or arbitragers.
As I always say we must never under-estimate our Comrades.
CMP to me is like reading Arabian Nights... it remains a work in progress.
The re-assuring part is the defensive business that it is in. MIIF under a astute, seen it all global investment banker tried it in China and we know the results.
In Rome, do what the Romans do. In the middle kingdom if anyone choose to, we will have to pick the right Comrades. Whether they treat us as one of their kind is dependent on which stage of the drama we are in.
For me, they are raising their stakes in building a bigger concept that is inline with Chinese incepted initiatives AIIB. It is the beginning rather than the end.
How buddies would like to play along with this theme is dependent on each's risk appetite.
I m convinced of their intentions but to maintain my exposure in an enlarged entity will elevate my risk profile beyond what i think is the overall mkt risks that I can bear.
Vested
Core
GG
(31-07-2015, 10:00 AM)CityFarmer Wrote: [ -> ]Will you take up the allocation @$1, GG?
I am yet to read the offer doc. How about other fellow shareholders?
(vested, and at a glance, the offer isn't attractive at all to OPMI)