China hits speed bump on Silk Road

As President Xi Jinping  prepares to welcome 28 heads of state to conference in Beijing this week  dedicated to his signature One Belt One Road (OBOR) initiative – his ‘soft power’ attempt to create a network of roads, railways, ports, power plants and fuel pipelines connecting China with south-east and central Asia, the Middle East, Africa and Europe – it has emerged that FDI from China  to countries along the so-called New Silk Road fell by 2% year on year in 2016 and, according to commerce ministry data, has dropped by a further 18% so far in 2017.
The decline has occurred  despite a 40% jump in outbound FDI in 2016, which raised overseas investment to a record high and prompted regulators to clamp down on foreign deals in a bid to curb capital outflow.
Xiao Yaqing, chairman of the State-owned Assets Supervision and Administration Commission, which oversees state-owned enterprises, this week dismissed the dip as an anomaly in a long-term upward curve. “Big investments, especially overseas, mean that the numbers might not rise every year,” he said.  “Let’s not look at year-on-year growth but at the development of the investment and the projects themselves. Over the long term, I believe investment into OBOR countries will rise.” He also disclosed that  47 central government-owned SOEs were involved in 1,676 projects in OBOR countries
Sceptics point out, however, that the geographic distribution of OBOR-linked FDI raises doubts about how much of that investment actually flowed into infrastructure; the leading investment destination in 2016 was Singapore, a high-income country with its own well-developed built environment.

Source: FT