B&R influences Chinese enterprises’ investment decision, two major risks tipped

The Belt and Road (B&R) Initiative has made an impact on Chinese enterprises’ investment decision, according to industry insiders.

Gabriel Wong, head of China Corporate Finance of PricewaterhouseCoopers (PwC), noted that the B&R Initiative has brought tremendous changes on investment location and scale of Chinese enterprises. For example, the construction of China-Thailand railway and China-Laos railway has made China closer to southeast Asian countries through land route.

Meanwhile, the industries in which Chinese enterprises invest have also changed a lot. “At present, Chinese enterprises mainly get involve in the infrastructure construction, transportation and logistics when participating in the B&R construction. However, with the gradual optimization of infrastructure, Chinese enterprises will enhance their investment in light industry and e-commerce in the future,” said Gabriel Wong.

In terms of the internalization of RMB, Gabriel Wong held that the B&R Initiative has played an important role in this regard. More people will use RMB on more occasions with the deep implementation of the initiative.

As for investment risks, Gabriel Wong said that compared with investment in developed countries, investment in countries along the B&R routes should guard against political risks and executive risks.

“Chinese enterprises mainly engage in infrastructure projects when making a primary investment in countries along the B&R. Most of those projects feature in long return period and low profits. Hence, some countries will offer Chinese enterprises certain subsidies to encourage their investment. However, the local governments may not fulfill the promose as agreed,” said Gabriel Wong.

Moreover, Gabriel Wong pointed out that there are various ethnic communities in many countries. They may have different opinions towards a certain project. Hence, it is likely to come across some resistance.