China Belt & Road ODI Up 13.8% January-May 2021

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South Asia the main recipient, Central Asia on the horizon 

China’s outbound direct investment (ODI) into countries involved in the Belt and Road Initiative (BRI) increased in the first five months of 2021, according to China’s Ministry of Commerce.

During these five months, investment into BRI countries expanded 13.8% when compared to the same period last year, increasing to US$7.43 billion. That accounted for 17.2% of China’s total ODI, which rose 2.6% US$43.29 billion.

Specifically, outbound investment into manufacturing and information transmission sectors – networks and so on – continued to grow. The manufacturing sector attracted Chinese ODI of US$7.2 billion, showing that investment into the Belt & Road Initiative continues.

Pakistan continues to be a major recipient of funds under the CPEC project, with new ground being broken on SEZ’s in the Punjab and close to the border with Afghanistan. Industrializing Pakistan has been a major part of the full BRI scheme, with a need to modernize the country, ensure it reaches its potential, is able to settle down some of its restless elements and both act as a supplier to China and back away the potential for exporting terrorism. The country lies on the southern border of China’s Xinjiang Province, which also has a border with Pakistan’s neighbor, Afghanistan. Investment into these regions in particular are likely to continue and grow as China seeks to balance the region, following the United States exit from Afghanistan in three month’s time. Pakistani troops are being trained by the Russian military in anti-terrorism and terrorist response tactics.

Elsewhere, China is continuing investments into Sri Lanka, with the huge Colombo Port City project continuing to require investment. Chinese companies are also likely to be buying into Sri Lanka’s Selendiva Investments which has taken a portfolio of underused property assets within the main Colombo city region and is packaging them together to raise development capital via listing them on the Colombo Stock Exchange.

Bangladesh is another hot investment destination for Chinese ODI, while China has also been investing, via the AIIB and NDB banks into projects and funds in India.

South Asia will continue to mop up Chinese ODI in the coming years until scheduled projects come onstream and create cashflow for investors. It will then reposition a focus to Central Asia, with a connectivity need to pull the landlocked yet resource rich region closer to China’s South Asia orbit.

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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 silkroad@dezshira.com or visit www.dezshira.com

 

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