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CEE nations' niche markets can boost Belt & Road push

By Oswald Chan in Hong Kong | China Daily | Updated: 2018-04-20 11:14
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Central and Eastern European nations can provide various niches to take the China-driven Belt and Road Initiative to a higher level, global business advisory firm PwC says.

PwC Partner and CEE/CIS Clients and Markets Leader Piotr Romanowski said that China can leverage the CEE countries' four major niches - infrastructure and logistics, manufacturing technology, supply chain management and unexplored agricultural land resources - to expedite the B&R push.

US credit rating agency Fitch Ratings said projects worth $900 billion were planned or underway under the B&R Initiative.

The 16 CEE nations encompass a diverse geographical area separated by the Caspian, Black, Mediterranean and Adriatic seas. PwC estimates these countries have a combined GDP of$3.1 trillion, accounting for 4.2 percent of global GDP. The combined population is 407 million, representing 6 percent of the world's total.

Foreign direct investment by Chinese enterprises in some CEE countries has skyrocketed recently. Poland attracted Chinese FDI worth $527 million in 2016, which was 14.5 times higher than the annual average figure between 2000 and 2015, according to think tank Mercator Institute for China Studies. The figure for the Czech Republic was even more staggering - up 25.8 times in 2016 compared to the annual average between 2000 and 2015.

Cross-border trading between China and CEE countries was estimated at $2.46 trillion last year, according to PwC data.

"I think this is where we are looking for infrastructure opportunities in these countries. This is where we believe there is potential for innovation, and this also offers potential for Chinese companies," said Agnieszka Gajewska, a partner and capital and project infrastructure CEE/Eurasia/Russia leader at PwC.

However, the CEE area is such a diverse and complex region with different legal and regulatory systems, and different levels of economic and political development. Chinese companies must develop proper risk management and mitigation techniques and procedures.

"When we are talking about more sophisticated investments in infrastructure, also in technology and innovation, a good understanding of local stakeholders is key. A good understanding of local contexts, including government objectives and industries, is relevant." Gajewska added.

B&R projects in economies outside China will generate an estimated $28 billion in commercial insurance premiums by 2030, with engineering, marine, project cargo and delayed startup risks in particular standing to benefit, according to global reinsurer Swiss Re.

Global business specialist insurer Lloyd's expects B&R trade and investment to generate significant reinsurance opportunities in support of Chinese carriers in business segments such as construction, project cargo, DSU and trade credit. The insurer provides package insurance solutions for B&R projects in areas such as construction, terrorism, project cargo and renewal energy insurance.

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