Belt and Road: an investment in the future

Global Outlook

Eric Bruce,Client Director – APAC & China, Global Strategic Client Programme

What do bonds issued by a Chinese port operator, the national railway of Georgia and the Pakistan government have in common?

The answer is they’re all potential investments in a US$3.8 trillion debt market linked to the Belt and Road Initiative (BRI).You may have heard about the initiative, also known as 'One Belt One Road'. It’s a US$26 trillion China-led plan to build infrastructure linking Asia and Europe via land and sea.

We’d been excited about the investment opportunities for some time, but felt we needed a partner in order to do the best job possible.

Enter China Construction Bank International. The Hong Kong-based investment bank is a subsidiary of China Construction Bank, with whom we have had a strong relationship for many years.

Strategic Partnership

Last November, we announced a strategic partnership with China Construction Bank International Asset Management (CCBIAM).

Forming collaborative partnerships is an important part of our client-led growth strategy. Working with others allows us to develop a deeper understanding that helps us tailor our services to better meet clients needs.

In CCBIAM, we’re lucky to have partnered with the offshore fund management business of one of China’s biggest state-backed lenders.

While our fund managers take the lead on bond selection, CCBIAM will provide strategic advice based on their in-depth knowledge of Chinese bond issuers and the BRI.

So what’s the big deal?

The BRI is a mammoth undertaking, a global infrastructure development strategy which has big implications for many countries.

The World Bank estimates there are some 70 so-called ‘corridor’ economies that will be directly affected due to their locations. China has signed BRI agreements with almost 140 countries.

Debt will finance the lion’s share of all this investment. Bonds and loans will be the cornerstone of the financing activity to raise the trillions of dollars needed.

Low global rates make it a good time to borrow for long-term infrastructure projects in emerging markets. Capital markets help to price, trade and manage risks.

For us, just monitoring the bonds – sovereign, quasi-sovereign and corporate – associated with the countries and companies involved in this project will be a daunting task.

That said, we think it’s a worthwhile exercise because of the attractive investment opportunities we see in China and elsewhere in the emerging and frontier markets.

Investors may find better risk-adjusted returns here than what’s available elsewhere in the yield-starved bond markets.

Regional development

But it’s not just about the dollars and cents for investors. The BRI will help channel much needed infrastructure investment into under-developed regions around the world.

For example, despite years of rapid development and improvements in living standards, some 400 million people in parts of Asia still lack access to electricity. This represents a huge funding need for energy infrastructure, especially renewable energy.

Access to information and means of communication are also problematic. This points to funding requirements for telecommunications that would lay the foundations for mobile payments and cross-border financial transactions – an opportunity to broaden financial inclusion.

We believe that countries and companies associated with BRI are likely to enjoy superior growth because of the synergies that will be created from being part of a wider network of trade and investment. We also think that the people in these places will be big beneficiaries.

BRI and Covid

The global pandemic still casts a massive shadow over us. Its effects on lives and livelihoods around the world will be felt for many years to come.

That said, selected Chinese BRI investments actually increased during the first nine months of last year, compared to the corresponding period in 2019. China has pledged to invest a total of US$1 trillion into the initiative.

While most of the rest of the world is still grappling with Covid-19, China is returning to business-as-usual. It was one of the few economies to grow last year and economic growth is expected to gather pace in 2021.

China’s push for greater trade integration and supply chain connection will continue to support its BRI investments.

However, what’s changed over the past year or so is a greater emphasis on so-called ‘soft infrastructure’ – environmental protection and social benefits; digitalisation and mobile payment systems that will help boost financial inclusion.


Emerging markets and environmental, social and governance (ESG) awareness may appear to be strange bedfellows. Some of the biggest emerging economies are also the worst polluters.

That said, times are changing. For example, China has spent the past few years trying to shed its image as an environmental laggard to become an environmental champion.

Last year, the government announced a goal to become carbon neutral by 2060. Its economic planners have ensured the country dominates the nascent wind, solar and batteries industries. The Beijing-based Asian Infrastructure Investment Bank is supporting sustainable debt investments.

China may not be a typical emerging market, but BRI investments are an opportunity to introduce sustainability concepts and practices into new places.

Final thoughts

The BRI is one of the most ambitious infrastructure projects ever conceived and investors will find opportunities to take part via the debt markets.

But an investment will also boost trade, help economic and social development, as well as promote sustainability principles in some of the most neglected parts of the world.

That’s why an investment isn’t just a matter of risk and return, it’s also an investment in the future.


The value of investments, and the income from them, can go down as well as up and you may get back less than the amount invested.