China’s new Silk Road

The Silk Road, created by China during the Han dynasty (207 BCE – 220 CE), has played a significant role in trade and the development of many countries including China, Korea, Japan and Europe, and today the silk road is undergoing a modern re-incarnation.

The Belt and Road initiative, which is also known as One Belt One Road (OBOR), is an economic and strategic agenda outlined by Chinese president Xi Jinping that aims to enhance cooperation and connectivity between the Eurasian and African continents.

Source: Lowy Institute

The strategy aims to revive an ancient network of land and ocean silk trade routes, which were opened in 140BC by Zhang Qian, a royal emissary who left for a tour of discovery from China to Europe. The OBOR includes two plans:

  1. The land based projects as the belt and;
  2. The maritime routes as the road

The overland Belt, where China plans to develop ports and hubs across the Indo-Pacific, includes the creation of a trade corridor extending from China’s west through central Asia to Europe. A key aspect of this is the development of new infrastructure, in particular, highways and railroads.

According to data compiled by PwC, up until February 2016, it tracked the equivalent of US$250 billion in projects that have either been built or agreed on in relation to the belt & road initiative.

For the maritime trade corridor, the core projects include the creation of a ‘port city’ in Sri Lanka’s Colombo and the development of a deep-water port in Pakistan, according to the Financial Times.

Overall, the belt and road initiative could be regarded as one of the most significant drivers for China’s foreign policy and long-term development strategy. It’s meant to reshape both the domestic economic development as well as the international trade activities over the years to come.

At UGC we believe that, although details around the strategy are currently scarce, the high expectations surrounding it show there is still a lot to like about China’s growth story and the investment opportunities that it will create into the future.

If you are looking to invest and would like to know which stocks we’re buying that have huge upside potential, contact United Global Capital today for a no cost, no obligation consultation on 03 8657 7640 or email info@ugc.net.au to learn about our Quality, Value, Trend (QVT) investment selection methodology.

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The information contained in this article is General in nature and has been prepared without taking into account your objectives, financial situation and needs. When assessing any investment you should also consider that past performance is not a reliable indicator of future performance.

Jeanne Peng

Jeanne Peng

Financial Analyst / Paraplanner at United Global Capital
B.Bus (Eco & Fin), GDipCom
Jeanne is a Financial Analyst at UGC
Jeanne Peng