Deep Dive 16 minutes Premium

DEEP DIVE: One Belt One Road – Impact On Western Multinational Companies

Executive Summary

  • The China-led One Belt One Road (OBOR) initiative will fund a network of infrastructure such as roads, railroads, ports, electricity and energy, and trade and finance ties between China and the countries along two routes: an overland route that links China with South and Southeast Asia, Central Asia, Russia and Europe, and a sea route that goes through the South China Sea and the Indian Ocean, and eventually reaches the Mediterranean Sea.
  • We think that the following are key benefits for Western multinational companies:
    • Infrastructure improvements will probably result in lower transit costs.
    • Enhanced infrastructure will make it easier for Western firms to tap into the lower-wage economies along the OBOR.
    • The OBOR initiative is likely to result in improvements in the business climate and in disposable income, which should bolster demand for consumer goods.
    • Multinational brands will gain from enlarged catchment areas as a result of infrastructure upgrades.
  • Additionally, infrastructure improvements are set to have direct positive impacts on companies in sectors such as logistics and tourism.
  • We foresee challenges in the short-to-medium term as US and Western multinational companies grapple with the environment in some of the emerging markets along the OBOR. In the long run, we expect these challenges to be mitigated by gradual improvement in domestic regulatory environments and believe the rewards are more than justified by the risks.

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