A UK trade delegation led by the prime minister to drum up trade with China scored a palpable hit yesterday when Standard Chartered signed a £1.12bn deal with the China Development Bank to fund Belt and Road Initiative projects.
Prime minister Theresa May will be relieved to have some positive headlines for this substantial win as she seeks to reassure her increasingly fractious party, dogged by infighting and talks of a leadership challenge, by claiming this as a sign that she is capable of rising above internecine politics to close deals for the UK on a global stage.
The deal will see the state-owned bank make available up to 10bn yuan (US$1.6bn) to Standard Chartered to fund corporate finance projects that will underwrite the infrastructure and utilities projects required for the project.
The Belt and Road Initiative is closely associated with President Xi Jinping (pictured left), who unveiled the policy in late 2013, and eagerly advocated by premier Li Keqiang during state visits to Asia and Europe.
In essence, it proposes to create a contemporary version of the ancient trade route between Europe and Asia known as the Silk Road.
The six key planks of the policy consist of:
- The New Eurasian Land Bridge (west China to west Russia via Kazakhstan)
- China–Mongolia–Russia Corridor (north China to east Russia)
- China–Central Asia–West Asia Corridor (west China to Turkey)
- China–Indochina Peninsula Corridor (south China to Singapore)
- China–Myanmar–Bangladesh–India Corridor (south China to Myanmar)
- China–Pakistan Corridor (southwest China to Pakistan)
- Maritime Silk Road (Chinese coast via Singapore to the Mediterranean)
Last year, ratings agency Fitch calculated that close to US$1trn – US$900bn – had already been earmarked for projects, many of which are already under way, and management consultancy McKinsey estimates that the project has the potential to overtake the Marshall Plan as the biggest development project in history.
The Marshall Plan allocated US$140bn in today’s money to rebuild western Europe after World War II, and if the figures estimated by McKinsey are anything approaching accurate, the Belt and Road Initiative would clearly dwarf the US-backed reconstruction of Europe.
Aside from banking and corporate finance structuring deals, British engineering companies such as Ove Arup and Mott Macdonald are hoping to win building and infrastructure projects across the region.
Wang Aijuan, a director at Mott MacDonald and a member of the prime minister’s delegation, said that this was a great opportunity to raise the company’s profile in China “and to share and learn lessons on future potential partnerships”.
Brexit means “just what one chooses it to mean”
Meanwhile, speaking to Sky News, international trade secretary Liam Fox said that further deals such as the Standard Chartered one could be “some time away”, jeopardised, or at least delayed, because of what he termed the UK’s “obsession with Europe” and the result of an extended Brexit implementation period – the so-called “soft Brexit” or “BRINO” (Brexit in name only) being urged by moderates within his party and allies of the chancellor Philip Hammond.
Fox said: “We haven’t got to Brexit yet, of course, and that may be some time away if we’ve got an implementation period, but what we’re doing is to ensure that when we have economic freedoms we can take advantage of them.
“We’ve set up a trade and investment review with China to take a look at the options we have in terms of our trading relationship and agreements once we have left the EU. But in this short term that doesn’t mean we can’t increase our trade.”
Fox also dismissed the gloomy impact assessment of a leaked report on Brexit carried out by Whitehall officials that found that the UK will be “significantly worse off in every department” because of Brexit, with greater damage the more extreme the version of Brexit.
It has been seized upon by moderates in the Tory party who are fighting against the Brexiteer colleagues to demand “BRINO” and to stay within the single market and possibly the Customs Union.