One Belt One Road – Commerzbank focus report
One Belt One Road: how corporate clients can seize their opportunities
"The Belt and Road Initiative (BRI)", often also referred to as the "New Silk Road", is a gigantic project with enormous entrepreneurial opportunities – but which German SMEs hardly take advantage of. This was the result of a survey conducted amongst corporate clients of Commerzbank. The subsequent focus report "Belt and Road Initiative" – "The New Silk Road" identifies concrete options for action in the various phases of the BRI.
The Belt and Road Initiative – BRI for short – or "New Silk Road", which was launched by China in 2013, is an almost global infrastructure programme linking China with Asia, Europe and Africa. New traffic routes, ports and special economic zones form a network of trade routes and means of transport which crosses borders and continents and is intended to accelerate and increase the exchange of goods and services.
"Belt and Road Initiative" still largely unknown
Despite the comprehensive media coverage of the project, German SMEs are poorly informed about the BRI. As Commerzbank's survey showed, only one in four respondents is familiar with the topic. In its focus report, Commerzbank has therefore now identified the opportunities arising for German companies from the BRI.
The road to success with local partners
Many SMEs have not yet understood how they can participate in the BRI. They are only involved to a very limited extent in construction agreements in the development phase. Companies complain about the difficulty of obtaining information for upcoming projects, the lack of transparency of tenders and the lack of equal opportunities in the awarding of orders. The only remedy here is to look for partners in China or the respective target countries in order to participate in this process.
New law promises equal opportunities in tenders
However, a new investment law, passed in March 2019 and providing for equal treatment of foreign and Chinese companies in public tenders, also promises improvement. In future, this should also make it easier for interested German SMEs to participate in BRI projects.
Attractive prospects in the operating phase
In the operating phase Germany should benefit even more from the BRI than it does at present in the development phase. Fast, safe and cost-effective transport routes open up great opportunities for our export-driven economy in trade with China and the countries along the various corridors. For this reason, companies should not only focus on China, but also, for instance, turn their attention over the medium term to the countries of the new Eurasian Continental Bridge or the China–Central Asia-West Asia Corridor: Kazakhstan and Kyrgyzstan, Russia, Belarus and Ukraine or Azerbaijan, Georgia, Tajikistan, Turkey, Turkmenistan and Uzbekistan.
Support for market entry and growth
To assist those SMEs wishing to become involved in the BRI, Commerzbank offers advice – not only from Germany but also locally – regarding the assessment of foreign markets and their inherent risks, and also in market entry and further growth. It has branches or representative offices in more than 50 countries along the "New Silk Road". It also maintains a network of correspondent banks in many other countries along the Continental Bridge and the Maritime Silk Road with which it cooperates closely.
Five billion US dollar financing package
In addition, Commerzbank and the Industrial and Commercial Bank of China (ICBC) signed an agreement in the summer of 2018 to support projects within the framework of the BRI. In the course of the next five years, companies and projects in BRI countries or with a BRI connection can thus be financed to a total of five billion US dollars. This gives German SMEs the opportunity to hedge better against default risks in trade finance and against currency losses, even in countries with a high risk profile.
For the long version of the focus report please click here:
However, in respect of sanctions law, special caution is required if the transport takes place via the Silk Road through Iran. The US embargo against Iran prohibits transports through Iran. If a transaction bears a relation to the jurisdiction of the USA, e.g. through the currency USD, the transport through Iran entails a violation of the US embargo. Goods which have been transported through Iran are regarded as Iranian goods under US jurisdiction.