One Belt, One Road
First proposed in 2013, the visionary ‘One Belt, One Road’ (OBOR) initiative is part of China’s President Xi Jinping’s ambitious plans to encourage China to take a global leadership role. The massive programme of infrastructure investment aims to strengthen Chinese security as well as enhancing ties with its neighbours.
Its scale is extraordinary:
- It will reach 68 countries and 4.9 billion people
- It has a predicted aggregate economic value of trade amongst these countries of US$28 trillion, representing about 40% of global GD
- Spending will bridge the infrastructure gap, connecting railways, ports, oil pipelines, bridges, telecommunications and fibre optic networks to accelerate economic growth.
In concrete terms, the Belt and Road initiative is an immensely ambitious development campaign through which China wants to boost trade and stimulate economic growth across Asia and beyond. It hopes to do so by building massive amounts of infrastructure connecting it to countries around the globe.
By some estimates, China plans to pump $150bn into such projects each year. In a report released at the start of this year, ratings agency Fitch said an extraordinary $900bn in projects were planned or underway.
The Digital Silk Road
OBOR’s investment will help develop technological infrastructure, improving communications, payments and cloud services and increasing increase both physical and digital connectivity. It’s China’s chance to set the pace of adoption and deployment of fintech within the region.
OBOR is a clear example of globalisation through massive infrastructure to facilitate economic and cultural benefits. There is no doubt there are complementary opportunities for those developing economies to use fintech. But there are significant challenges to overcome – perhaps the greatest is anticipated governmental and regulatory pressures, which commentators believe could limit fintech’s potential.
OBOR will help develop technological infrastructure, improving communications, payments and cloud services and increasing increase both physical and digital connectivity
Islamic finance is a potential area for innovation. There are opportunities in the legacy banks too, although while Hong Kong and Singapore are already primed for expanding fintech opportunities, the countries with developing economies should benefit most. For example, areas where high borrowing costs have inhibited growth have tremendous potential. Remittances are also soaring globally, and it’s also believed Bitcoin could be a big part of any future OBOR revolution.
Traditional credit mechanisms tend to apply in countries with developed financial systems, where people have relatively complete archived information, stable work and shelter. Where economies are relatively underdeveloped, this is missing.
The rules of financial services tell us the greater the risk, the greater the required rate of return: this creates a negative cycle where loans are needed but are difficult to obtain or afford. Financial technology can help meet this challenge and with OBOR, Hong Kong is poised to lead the way.
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