Is China’s “Silk Road” initiative a super highway or a dead end for Hong Kong’s future economy? China’s One Belt, One Road policy holds immense promise of benefits for many countries, including Hong Kong, although there are bound to be many complex challenges before it takes off, said George Yeo, chairman and executive director of Hong Kong-based Kerry Logistics Network. Describing the campaign as a movement that will bring about a “complete reopening-up of Eurasia”, Yeo said the driver of the plan lies in the billions who are currently unable to tap the global market because of bad connections and logistics. One Belt, One Road is Beijing’s push to drive cooperation among countries in Eurasia along the ancient Silk Road trading route to form a cohesive economic area. A similar programme for a 21st century Maritime Silk Road aims to boost collaboration in Southeast Asia, North Africa and Oceania. “One Belt, One Road will be creating a huge flow, at the end of which we are going to find Eurasia crisscrossed by connections,” said Yeo. “It is like angiogenesis in the human body. First you grow the vessels, then logistics companies like mine will provide the blood circulation, and development follows.’’ “I think it will mean a second wave of growth for Southeast Asia due to the opening up of so many transport links and increasing integration with China,” Yeo said at the recent ALMC conference in Hong Kong organized by the Trade Development Council (TDC). Kerry Logistics is continuing to build its regional express network with plans to have a pan-ASEAN network in the next 18-24 months. Eric Ip, group managing director of Hutchison Port Holdings (HPH), told the same conference the initiative will spur investment in intermodal and port infrastructure projects and motivate companies to explore opportunities in new markets. HPH, which has operations in 56 ports in 26 countries, has 19 operations along the Belt and Road routes, including deep sea, shallow and inland ports. “Certainly there are risks,’’ said Ip. “We invested in Myanmar and had to wait 20 years before anything happened. Excluding China and Europe, the countries along the routes account for just 13% of global imports and 14% of global exports. This is a big opportunity.” HK’s Potential For Hong Kong companies to take advantage of these opportunities they have to really do their research to see which markets have potential and suit them better, said Ip. “When I say potential I mean if they are very local-centric and a closed market then you can hardly get into them and you rather go somewhere else where you have bigger opportunities. It is a matter of market study and finding the right partner with the right knowhow. “For Hong Kong companies to go into develop the Chinese market you either do it by acquisitions or team up with local parties. It is the same with other countries. Many of the countries along the roads are closed shops. They give the privilege and rights to only local companies. If you go into those countries you need local partners. You can bring them expertise, connectivity and probably financing as well. “Hong Kong is a good base for the One Belt, One Road strategy because it is a part of China and more international. Hong Kong is important because it is a free market for finance. If you want to launch a project in other countries you have to go through a lot of process to get funding. But in Hong Kong it is easy. “Hong Kong is a cosmopolitan city and its people can give you a lot of insight into the Asian market. It is a good combination of international and local wisdom.’’ A Long Road to Travel Zhao Huxiang, chairman of Sinotrans and CSC Holdings, a state-owned enterprise and China’s largest logistics service provider, said at the ALMC conference, “In 2014, China’s trade with the One Belt One Road countries was US$1trillion, a figure expected to double in the next 10 years. This is a big opportunity and I see growing demand for contract logistics, storage and delivery services.” Sinotrans is expanding its operations along the One Belt, One Road routes, including the launch of new rail services from Guangdong and Gansu to Central Asia; new sea routes to the Philippines and Indonesia; and investment in hubs in the western Chinese cities of Chengdu and Chongqing. “Before the initiative was raised a lot of our growth had been happening along these routes. We were growing fast but now expect to grow even faster,” said Zhao. “Some of the countries are very underdeveloped. There are risks, but we try to control them by working with local partners and other means. Generally speaking, the opportunities are bigger than the risks,’’ he added. Another China state-owned enterprise, China International Trust and Investment Corporation (Citic), will invest US$113 billion to support the One Belt, One Road strategy. Citic will invest in 300 projects stretching from Singapore to Turkmenistan that include a network of roads and railways, oil and gas pipelines, power grids, internet networks, and maritime links. Some of the financial commitments have already been announced by the Chinese government: US$40 billion to the Central Asia focused Silk Road Fund; US$50 billion to the new Asian Infrastructure Investment Bank (AIIB) launched in 2015; and US$10 billion to the BRICS-led New Development Bank. Hong Kong’s Chief Executive C Y Leung earlier told a conference in Hainan “bringing together countries and economies on such a huge scale demands infrastructure – and the capital to build it – on an equally grand scale. Hong Kong can help make it happen. “As China’s major international financial centre, and one of the world’s financial capitals, Hong Kong has the experience, the expertise and the connections to serve as One Belt, One Road’s fund-raising hub – the super-connector between the mainland and the rest of the world. “And as the Maritime Silk Road finds its sea legs, it will create fresh demand for shipping services, as well as quality maritime services. Hong Kong will be ready. “We have a strong base of ship owners and a cluster of diversified maritime services. These include ship agency and management, ship finance, ship broking and marine insurance, finance, ship registration, and maritime legal and arbitration services.’’ Jessie Chung, chairwoman of the Hong Kong Container Terminal Operators Association, told AJOT, “I believe Hong Kong can play a complimentary role in the One Belt, One Road initiative. Hong Kong port as a gateway to Mainland China can enhance its transshipment hub function and handle cargo among mainland, Asian countries and ports along the maritime Silk Road. Hong Kong port operators can also help offer investment and/or operations expertise in developing ports along the road, if such opportunities arise.’’ Early Stage of Development Trade initiatives are at an early stage, and the huge investment being poured into developing logistics along the transport corridors is certain to breed a few white elephants. Financial Secretary John Tsang Chun-wah said, “In various service sectors, including accounting, legal, building, engineering, and management, Hong Kong possesses a huge pool of experienced talents. We believe Hong Kong can become a high-end platform of professional services for the One Belt, One Road initiative.” Hong Kong Trade Development Council chairman Vincent Lo Hong-sui said, “The One Belt, One Road proposal is a golden opportunity for Hong Kong to make a major breakthrough. Hong Kong’s trade with countries along the belt and road route was about US$670 billion last year, accounting for 66% of the city’s total trade.” Victor Fung Kwok-king, chairman of Hong Kong-based supply chain operator Fung Group, reckoned that Hong Kong could capitalize on its expertise in information technology, financing and marketing to support the mainland’s economic development. “Hong Kong can transform itself into an angel seed-fund investment center, and utilize its rich business experience to develop small-and-medium enterprises to support the mainland,” he said. Adding “The winners in the trade initiative would be those who could come up with innovative business models.’’ With so many land borders between China, Central Asia and Europe, a key part of the trade strategy rests on the cooperation between countries along the routes with which China is engaging to remove investment and trade barriers.