China’s One Belt, One Road: Will it Reshape Global Trade?

Maritime Activity Reports, Inc.

July 25, 2016

Kevin Sneader and Joe Ngai discuss. Photo: McKinsey Insights

Kevin Sneader and Joe Ngai discuss. Photo: McKinsey Insights

 The future of trade in Asia could depend heavily on what becomes of China’s expansive One Belt, One Road initiative, which calls for massive investment in and development of trade routes in the region. 

 
In this episode of the McKinsey Podcast, recorded in May, McKinsey senior partners Joe Ngai and Kevin Sneader talk with Cecilia Ma Zecha about One Belt, One Road—what it really means, what it needs to become a reality, and why people should take it seriously.
 
Cecilia Ma Zecha, an editor with McKinsey Publishing, based in Singapore: What exactly is One Belt, One Road?
 
Kevin Sneader, McKinsey’s chairman in Asia: At one level, One Belt, One Road has the potential to be perhaps the world’s largest platform for regional collaboration. What does that actually mean? There are two parts to this, the belt and the road, and it’s a little confusing. 
 
The belt is the physical road, which takes one from here all the way through Europe to somewhere up north in Scandinavia. That is the physical road. What they call the road is actually the maritime Silk Road, in other words, shipping lanes, essentially from here to Venice. 
 
Therefore it’s very ambitious—potentially ambitious—covering about 65 percent of the world’s population, about one-third of the world’s GDP, and about a quarter of all the goods and services the world moves.
 
That is what’s at the core of this—at least a potential trading route. The belt, the physical road, and the maritime Silk Road would re-create the shipping routes that made China one of the world’s foremost powers many, many years ago.
 
Joe Ngai, managing partner of McKinsey’s Hong Kong location: China is seeing a bit of a slowing down in its growth. 
 
A lot of people are saying that that’s part of the next growth wave of Chinese exports, which is that it’s going to have its influence and its infrastructure build-out in many of these countries, most of them emerging markets, in lots of things that frankly have fueled the very high growth in China over the past decade.
 
What remains to be seen is if that can be replicated in many of these countries in the next ten years. That is very significant. Because many of these countries are really lacking in this infrastructure. 
 
I remember when I take groups of delegates into China; they always marvel at the trains, the railway stations, the airports, and all that, which frankly is a bit of a miraculous creation in the past two decades.
 
The question is going to be how these are financed: whether there is going to be long-term planning that’s required, and whether the local governments and the state governments are able to take the Chinese model and the Chinese infrastructure and figure out how they can have their own version.
 
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