Modern Slavery Act Statement. Negotiations can drag on, agreed positions can be re-opened, requirements for recourse to the sponsor may be raised indinesia time a new obstacle is encountered and outbound and credit approvals can fail to materialise. For projects not indonesoa by SINOSURE for example those funded by the AIIB there is scope for foreign companies to take a contractor role as well. There are reports that the Silk Tradinh funding has already been fully deployed. Such countries are typically not covered by commercial banks, are often perceived to have political risk and often have relaxed labour controls, allowing for the deployment of Chinese labour. A focus on manufacturing capacity relocation as opposed to exports will also help to mitigate rising labour costs and pollution concerns and help China to achieve its global emission reduction commitments.
Launched by Chinese President Xi Jinping inthe initiative aims to connect major Eurasian economies through infrastructure, trade and investment. It will see a RMB1. What is clear is that the potential opportunities for infrastructure investment are immense. A snapshot of the land corridors and a map showing both the Belt and the Road is set out overleaf. Aim: new major road and rail logistics passageway from China to Europe which is faster than sea transport and cheaper than air routes.
Project spotlight: international freight train line from Lianyungang via Xinjiang province to Kazakhstan February Hot topic: covering 10,km in length China is working with customs departments in countries such as Kazakhstan, Poland and Russia to reduce customs clearance costs along the route. Aim: utilise existing international freight lines and construct a northern passageway to connect Beijing, Dalian and Tianjin with Western Europe.
Aim: important gateway for oil and natural gas, running from Xinjiang to the Arabian Peninsula, Turkey and Iran. Project spotlight: Chinese contracts signed with Kazakhstan, Kyrgyzstan and Tajikistan to work on trade facilitation and logistics. Hot topic: A Chinese consortium acquired a Hot youtube forex trading indonesia eximbank the route aligns with the plans of the Greater Mekong Sub-Region, an economic area formed by the Asian Development Bank.
Aim: shortcut to the Middle East and Africa via Dubai and Oman, trading forex online indonesia zimbabwe the Strait of Malacca. Hot topic: the Indian government has opposed this route, as it passes through Kashmir. Hot topic: progress of the road has been difficult as a section passes through Arunachal Pradesh — an area both subject to a territorial dispute between China and India, and prone to insurgency. The primary goal is to create new trading routes and business opportunities within China and beyond.
Behind this, the drivers both official and unofficial are complex, diverse and interconnected. On a domestic level, China wants to stimulate regional investment to better integrate poorer inland provinces into the Chinese economy, and to mitigate urban migration, wealth disparity and unrest from ethnic minorities. A focus on manufacturing capacity relocation as opposed to exports will also help to mitigate rising labour costs and pollution concerns and help China to achieve its global emission reduction commitments.
The routes themselves will facilitate trade, cooperation and relationships with host countries and partners in developing projects along the routes. Recognising the need for dedicated funding to support the Initiative, and to address the regional shortage in funding, China has also launched two new financial institutions: the Asian Infrastructure Investment Bank AIIB and the Silk Road Fund.
The AIIB is a multilateral development bank led by China and located in Beijing with a mandate for infrastructure investment across Asia Pacific and its member states. It is expected to work in a similar fashion to the ADB. Countries scrambled to join China as founding members, with over 50 signing up at its launch in There are reports that the Silk Road funding has already been fully deployed. The new financing institutions and directives to state-owned companies also have a secondary advantage of readjusting sources of capital in Asia to be driven by Asia, youtube forex trading indonesia eximbank with Beijing in the driving seat.
As a government initiative focused on infrastructure development, the main players will be state-owned enterprises taking a contractor or sponsor role and financial institutions such as CDB, Binary options trading course online quiz, ICBC and SINOSURE active in the infrastructure space. The traditional sweet spot for Chinese capital is emerging markets. In these youtube forex trading indonesia eximbank difficult jurisdictions, Chinese pricing of kit and debt is competitive and Chinese funds can be deployed comparatively quickly.
Such countries are typically not covered by commercial banks, are often perceived to have political risk and often have relaxed labour controls, allowing for the deployment of Chinese labour. Foreign investors willing to take a degree of country risk and co-invest with China in such jurisdictions can take advantage of Chinese capital and these associated benefits.
The most important of these is the commercial and political risk insurance cover provided by SINOSURE the Chinese stateowned export credit insurance provider to support Chinese companies, offering a partial fix for host country political risk. On the flipside, for more established jurisdictions such as the Middle East and Turkey, China needs outside help and is looking to partner with well-known foreign companies who have a track record of doing business in these countries and are better able to win contracts.
A consortium led by CRCC is expected to be a favourite to win the construction contract for the Kuala Lumpur- Singapore high-speed railway, the first of its kind in Southeast Asia. Geographically, some of the terrain is harsh, involving long distances, high costs and potential security and insurance concerns. Religious extremism may jeopardise the safety of projects. Local corruption, tensions with neighbours and domestic issues may also hinder projects. Political risk guarantees may help, but these may not be available for all jurisdictions and projects, particularly those going across several borders.
Other examples of political instability were seen during the construction of the controversial Myitsone Hydropower Project in Myanmar, which was suspended due to NGO opposition in From a financing perspective, low host country credit ratings may present a challenge. Traditionally, infrastructure projects require high-standard management, have long operating cycles and uncertain profits.
Therefore, it is vital that investors have a clear understanding of the relevant legal systems, security structures and risk management profiles. When it comes to identifying enforcement risks, foreign investors tend to over-emphasise enforcement risks when dealing with a Chinese EPC contractor. Chinese parent company guarantees will invariably be with a mainland Chinese state owned enterprise, probably based in Beijing. This means a Singapore, London or Hong Kong arbitration award may ultimately need to be enforced in courts in Beijing.
China has introduced procedures to ensure that such awards are readily enforced in China, and in practice, this should usually be the case. However, occasionally sponsors have encountered issues calling bank guarantees from Chinese banks. Chinese law allows a PRC court to claim jurisdiction to restrain a call on the bank guarantee where there is any claim of fraud. This risk should not be overstated, but sponsors should still consider asking for bank guarantees issued by a non-Chinese bank.
By continuing to use this website you agree to our use of our cookies unless you have disabled them. Vision and business principles. Online services, resources, and tools. Where is the money coming from? Opportunities and questions for investors and host countries. Potholes along the way? A long and winding road. New Eurasian Land Bridge Jiangsu province to Rotterdam, Netherlands.
Central and Eastern Europe:. Albania, Bosnia, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Poland, Romania, Serbia Western. Belarus, Moldova, Mongolia, Russia. China — Central Asia — West Asia Corridor. Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan. Afghanistan, Armenia, Azerbaijan, Bahrain, Georgia, Iran, Iraq, Israel, Jordan, Kuwait, Qatar, Oman, Saudi Arabia, Syria, Turkey, Yemen.
China — Indochina Peninsula Corridor Pearl River Delta Economic Circle Guangzhou, Hong Kong and Shenzhen to Indochina. Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Timor-Leste, Vietnam. Aim: greater expansion into markets traditionally dominated by Japan and Korea. Project spotlight: Chinese consortium awarded the contract for electrification and double-tracking of the Gemas — Johor Bahru rail route December China — Pakistan Corridor Xinjiang province to Gwadar, Pakistan.
Bangladesh, Bhutan, Maldives, India, Nepal, Pakistan, Sri Lanka. Bangladesh — China — India — Myanmar Corridor. Is the target country open to Chinese investment? Some countries continue to be sensitive to investment by Chinese companies, particularly state owned enterprises. Is political risk cover available? SINOSURE is one of the few active cover providers in these regions.
SINOSURE cover is only available in support of exports of Chinese goods and services. In practice this means that the key equipment must be from China, while balance of plant and civil works can be locally or internationally sourced. Where are the sector opportunities? Many ports on the 21st Century Maritime Silk Road currently lack the depth and equipment capacity to accommodate large ships.
Transport infrastructure investments are hoped to provide shippers with more options for transporting freight whether by air, sea, road or rail, boosting shipping and cargo demand. What are the investment opportunities? However, larger Chinese utilities and infrastructure companies, such as CCCC, China State Construction Engineering Corporation CSCECChina Railway Rolling Stock Corporation CRRC and China Rail, will generally require that they are the majority shareholder in order to consolidate the investment on their balance sheet.
A foreign investor in a SINOSURE backed transaction which will include any project funded by a Chinese bank will not be able to take sole key EPC, sub-contractor or supplier roles because the project would then fail to meet SINOSURE requirements for China content. For projects not backed by SINOSURE for example those funded by the AIIB there is scope for foreign companies to take a contractor role as well. Co-financing opportunities should exist alongside Chinese banks and the AIIB.
Co-financing also tends to be more messy and time-consuming than simply tapping Chinese debt. Projects funded by the AIIB may be particularly time-consuming given the level of scrutiny which is likely to be demanded by its membership. That means that a foreign investor will need to look to whether the contractor can secure finance on attractive terms and to overcome negotiation obstacles. Investors should establish early on the substance to Chinese finance support, as contractors can youtube forex trading indonesia eximbank rash promises around finance when securing an EPC mandate.
Key points should be negotiated up front and, youtube forex trading indonesia eximbank, a finance term sheet stapled to agreements with the contractor. Execution risk — the more international Chinese companies and private Chinese companies can readily meet tight bid timelines. Local Chinese state owned enterprises with less international experience typically find this more difficult, causing delays in obtaining internal approvals. Project execution risk also tends to be higher when foreign companies partner with Chinese companies.
Negotiations can drag on, agreed positions can be re-opened, requirements for recourse to the sponsor may be raised each time a new obstacle is encountered and outbound and credit approvals can fail to materialise. A key to managing execution risk is to maintain competitive tension from a non-Chinese contractor for as long as possible. Sovereign support — Chinese banks tend to require SINOSURE cover in order to fund a project unless there is strong sponsor support.
Larger SINOSURE transactions also require the approval of the State Council, which is the executive arm of the Chinese government. SINOSURE itself has traditionally required sovereign support, particularly for energy projects. Whilst an additional hurdle, strong sovereign support for infrastructure projects will mean easier approvals. Regulatory approvals — Chinese outbound approvals and Chinese bank credit approval processes are not well understood.
Carefully managed, the risks these approvals present are minimal. The key is to understand which regulators need to approve the transaction, when the approvals will be obtained and whether the transaction documents need to be conditional upon outbound approval. It is important to be aware of potential problems as early as possible. Credit approval — Chinese bank support can be a frequent source of delays.
Term sheets and commitment letters can be pulled together quickly but credit approval can take time. The credit departments of the Chinese banks are among the busiest in the world. A simple structure that follows established Chinese precedents and documentation will be approved more quickly than a new one. A Chinese partner will generally need board, shareholder, credit and various governmental approvals or registrations — and all of them need to understand the structure of the transaction.
More generally, the current world economy remains unstable and investment appetite uncertain. Stay up to date Subscribe and stay up to date with the latest legal news, information and events Infrastructure, mining and commodities. Life sciences and healthcare. Modern Slavery Act Statement.
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The primary goal is to create new trading routes and business opportunities within China and beyond. Behind this, the drivers (both official and unofficial) are.