How Non-Chinese Companies Can Start To Exploit Belt And Road Initiative Projects

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Op/Ed by Chris Devonshire-Ellis

  • Exploiting the infrastructure build
  • Huge opportunities in the service industry sector 
  • Understanding the local regulatory environment 
  • Examining local tax structures and applicable tax treaties
  • Solving the overseas banking and treasury issue

Foreign involvement in Belt and Road projects has been fairly limited, mainly as much of the interest and attention has been on participating in the multi-million dollar infrastructure builds, and these typically come with Chinese state financing, conditional that Chinese SOEs conduct the work. Chinese BRI projects favor other State Owned partners rather than public companies, both for business cultural reasons and for keeping details out of public scrutiny; while the sheer nature of Chinese financial competitiveness combined with sometimes superior technology and construction expertise, also plays a part, especially on difficult terrain. China for example built the rail to Lhasa, very few if any foreign contractors have that type of experience.

Accordingly involvement in BRI projects tends to be limited to Chinese contractors and their local partners where the project is situated. In fact, other foreign investors are missing a trick here, as most of China’s BRI projects are now nearing completion with the infrastructure build coming to fruition.

This creates new opportunities for foreign investors to look at the original purpose of building the project in the first place and the increased commercial business flows this will generate. For example, Sri Lanka’s Southern Expressway was completely Chinese built and financed (with a lot of criticism about the cost). However that spurred a huge growth in the regional tourism industry. I touched on that particular project here: and about the related Colombo Port City development here which will see Colombo city develop into a Southeast Asian office center for back-office functions. All of these provide investment and service development opportunities for foreign investors.

I can relate to them first hand as I maintain several properties in the southern coast of Sri Lanka. I have personally experienced the developments that the Southern Expressway has brought in and how the Port city development is progressing, and have no doubt that this experience will manifest itself across other BRI projects as well. I described some of these as follows:

The message here is that the opportunities lie where the BRI infrastructure build has been completed, there are asset enhancements and appreciations and international investors can provide the service elements to support the increased trade and human needs the physical infrastructure provides. But very few businesses are looking at this, although our firm provides the market intelligence for them to do so. The penny hasn’t yet dropped, yet there are ways to examine the potential for involvement and exploiting the build.

The main issue is looking at the local financing and regulatory requirements along with local banking issues. These can vary tremendously and especially along the BRI as by proxy most of the countries involved are emerging economies. Investment laws and service facilities may not be as advanced as in Europe or North America. China gets around this by having G2G agreements that are typically worked out at the diplomatic level, foreign private investors may not have this option. So the first thing to look at are the local investment laws, and what banking services are provided to foreign investors. This needs to be done on a country by country basis as not all have the same legal, tax or operational infrastructure. Many do not possess internationally or even commonly traded or exchangeable currencies. Often local laws permit the investment of foreign currency but restrict its subsequent repatriation. I discussed the varying types of legal and regulatory systems deployed along the BRI in the article Corporate Law Standards And Procedures Along The Belt And Road Initiative.

Also there are double tax treaties that impact upon applicable rates, these can be used to mitigate against profits tax levels. All this needs to be understood before any investment is made. The first thing any business interested in looking at investing in a second country should do is examine the local foreign investment laws, applicable tax treaties and the local regulatory environment and examine the operational aspect of handling financial transactions.

For South-East Asia, and the ASEAN bloc which includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam all these countries have differing foreign investment laws, different currencies and levels of banking capabilities. All are part of the BRI and there are huge opportunities for exploiting the infrastructure build that is taking place across the ASEAN region. It can be very difficult for foreign investors based from overseas to establish meaningful relations from the US or EU with local banks in ASEAN.  However Singapore is the de facto financial capital of ASEAN and numerous Singapore banks have relations with their ASEAN counterparts. So using Singapore as a base for handling ASEAN investments is sound corporate practice, and is a subject we discussed in the article Why Singapore Is A Good Base For Establishing Financial Treasury Centers.

There are similar trade blocs in other parts of Asia, the Middle-East, South America, Africa and Eurasia. So the good news is the regulatory aspect is defined. What needs to be conducted is the local regulatory research.

There are additional risks that corporate treasury departments have to navigate regarding BRI projects, many of which will be familiar to Treasury professionals:

  • Political risks – the stability of the local government and its credit rating;
  • Currency risks – especially during these times, assessing currency risks, inflation, devaluation, exchange rate fluctuations and so on all need to be assessed;
  • Due diligence – checking out the local banks viability, the imposition of any sanctions, and operational ability to conduct business – some countries, including China, are extremely reluctant to process banking arrangements with even legitimate businesses due to the extent of US sanctions.
  • Ability to repatriate funds.
  • Ability to access professional firms at standards able to fold local accounts into consolidated reports to HO regulatory standards.

There may also be issues related to trademark registrations if investors are to introduce their brands to new markets. I discussed that in the article Submitting Trademark Registrations Along The Belt & Road Initiative.

While the immediate momentum, scale and long-term timeline driving BRI projects has slowed due to the Covid-19 pandemic, Multinationals will increasingly want to take advantage of China’s more pragmatic view on international involvement and constrained ability to be the sole financier of all things BRI. There may have been a slowing of BRI investment right now, but it’s here to stay. China judges the short term by decades, and the BRI is an opportunity for businesses with a longer term development view.

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Silk Road Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Asia, and assists foreign investors into the region. For strategic advisory and business intelligence issues please contact the firm at or visit