The massive population concentrations in the cities of the eastern and southern coasts of China represent an increasingly wealthy and quality-savvy market for food products. Western China, the ancient Silk Road, in contrast, is open and underpopulated but produces high-quality fruits and vegetables for shipment to the east. Adjoining Central Asian countries, such as Turkmenistan, share some of the agroecological advantages of western China, but lack the supply chains and technologies required to meet their export potential. A seamless overland transport system across China, through Central Asia, and into the European Union via Turkey could carry goods to and from Europe and China and support the development of all of the countries along the route. Similarly, a refocus on ancient shipping lanes—from China to the Horn of Africa via Sri Lanka, serving as a major logistics hub, could increase transportation efficiency and lower transportation costs, while stimulating new economic development in Africa.
A vision for large-scale investment in westward-focused transport infrastructure, including supporting technologies and streamlined regulatory systems, is the basis for China’s Belt and Road Initiative (in Chinese, —带—路, yi dai yi lu) (4). The stated aims of this initiative, a development strategy proposed by President Xi Jinping of the People’s Republic of China in 2013, are
- To encourage the free flow of goods and services, effective and efficient distribution of resources, and deep integration of markets by connecting countries in Asia, Europe, and Africa and their adjoining seas.
- To welcome all nations and international organizations to engage in the development and to honor mutual respect and the operation of free markets for mutual success.
- To emphasize connectivity and cooperation between Europe and Asia, principally the People’s Republic of China, via the on-land economic belt and the maritime Silk Road.
The initiative centers on a China-focused trading network and has a broader scope in facilitation and development of global activities. It was originally titled One Belt and One Road and was officially retitled as the Belt and Road Initiative (BRI) in 2016. This optimistic and outward-looking official policy does have constraints and limitations, as discussed below, which are primarily related to unaffordable debt to China that could potentially be accrued by nations that receive development projects, not all of which can become productive and profitable assets.
There are three proposed directions for land-based routes: from China to Central Asia, Russia, and then Europe; from Central Asia through Western Asia to the Persian Gulf and the Mediterranean Sea; and from Southeast Asia to South Asia and then countries in the Indian Ocean (Fig. 1). The proposed sea-based route connects coastal Chinese cities with countries in South Asia, Africa, and the Mediterranean Sea (1). The aim of the BRI is to bond various corridors and connect more than 65 countries, supplying 4.4 billion people, or 66% of the world’s population, and 40% of the world’s GDP, or US$23 trillion (3).
Primary Goals of the BRI
For the first few years, the primary foci of the BRI are infrastructure investment in railways, roads and highways, construction materials, automobiles, real estate, iron and steel trading, and power grid development. Examples include the implementation of a 12,000 km railway from London to China; a road from the Xinjiang Province in China to Gwadar in Pakistan; a railway from China to Iran; and Asian gas pipelines. The aim of these initiatives is to strengthen and intensify existing trade routes and develop new ones; work with countries across routes to build and increase ports; invest in and build logistics hubs and transport infrastructure; and enhance connectivity through transport, energy resources, international trade, joint investment, and supply chains. China hosted the first Belt and Road Forum for International Co-operation in May 2017 and announced a list of 76 key BRI achievements under the five categories of policy coordination, financial integration, unimpeded trade, facilities connectivity, and people-to-people bonds (2).
With the help of an improved infrastructure, transportation, and logistics system linking the East and the West, companies from all over the world that supply agricultural products, food processing, industrial products and support services, or consumer food products can enjoy many potential benefits and growth. The new supply chains can help in sourcing a variety of food ingredients from BRI-connected countries, with reduced transport costs and shorter lead times; can provide new channels for Chinese investments and financial cooperation (including foreign investments in China); and can open up new markets in China, ASEAN (Association of Southeast Asian Nations), the Middle East, and Central and Eastern Europe. The BRI is a diffuse concept and, to a large extent, a collection of individual infrastructural projects implemented in and owned by the recipient countries. The main ongoing interest of China in the projects is related to the debt accumulated to pay for them, usually at a country-to-country level. In some countries, for example Sri Lanka, the level of debt owed to China has become an issue of high-level political contention. China does not, however, generally control access to the benefits provided by BRI developments. Any company operating in a relevant country can make use of the infrastructure (e.g., a highway to port transport development) under normal commercial terms.
Benefits and Challenges of the BRI
There are increasing numbers of Chinese companies importing quality food products and agricultural goods from international markets. In fact, China is the globally dominant importer of food products and agricultural goods. China also exports food and agricultural products to more than 210 nations. Chinese food and agricultural product companies have undertaken aggressive plans to develop into international markets and make overseas acquisitions. The first Belt & Road International Food Expo was held in Hong Kong in June 2018 and will be held annually. The expo facilitates networking among potential global buyers and traders, investors, and bankers who are exploring the fast-growing food markets in BRI-connected countries.
Although the BRI offers numerous opportunities to encourage global trade, at the same time, it may encounter challenges with regard to internal problems in the countries and regions involved. These challenges include risks from uncertain political and regulatory conditions, as well as economic, technological, social, and environmental risks. Companies must weigh the sizable prospective benefits against these hazards. Examples of some potential hazards include the political instability in Kazakhstan, as recent protests reflect an increasingly nationalist agenda; cases of unfair judgements in contractual disputes in local courts toward foreign companies have been reported in Vietnam; and the persistence of labor shortages in Malaysia. Moreover, varying tax policies, government effectiveness, and the standard of infrastructure in different nations may likewise generate barriers for the BRI. There are also credit risks, as there are some 68 countries and diverse regions in the BRI, with sometimes incompatible and incoherent governance, currency, and banking sector issues. Furthermore, businesses in the agricultural and food products sector may require a longer investment cycle than many others and, thus, may be exposed to more risks. It is a big task to manage and supervise production procedures and to follow internationally harmonized food safety standards in these countries and regions. Nonetheless, a key aspect of the BRI is its effect on mitigating these risks by the continued deepening of the integration of regulatory and business standards and practices.
Potential Effects of the BRI on the Global Food System
What are the potential consequences or effects of the BRI on the global food system? China believes that the effects will be positive and global, rather than affecting only China. Ideally, the development of advanced agro-food industries dependent on the BRI infrastructure can reduce pressure on existing major export countries, such as Australia, where water is limited and expansion of cereal production may be difficult, or New Zealand, which is too small to expand production of dairy products to the level potentially needed by major Asian importers. In addition, the BRI can facilitate expansion of Central Asian and Eastern European production, both for high-quality, high-value products and for grain production (perhaps in competition with existing major producers such as the United States, Brazil, and Argentina).
There are, of course, some potential negative effects, in that the BRI infrastructure combined with tariff-free trade agreements could introduce new levels of competition into less developed markets. An example of this is the current dispute between China and Kenya over the import of Chinese tilapia, which undercuts the prices required by Kenyan producers to stay in business. More broadly, the globally developed trade links, converging on China, could enable China to play a more effective role in responding to potential global food crises. Overall, the nutritional state of the Chinese population is good, but there are risks related to the environmental impact of jointly developing intensive agriculture and further industrialization. Chemical contamination of soils, water, and air can negatively impact food quality, and incidents of food poisoning are difficult to avoid under the pressure to feed such a large population. However, the quality dimensions, including safety, of the Chinese diet could be enhanced by increasing the importation of, in particular, fresh foods such fruits, vegetables, and meat.
For companies with an international outlook, that are involved in exporting or importing, implementing new manufacturing or agricultural projects overseas, or performing research and consultancy to support such activities, a careful examination of the opportunities, and risks, of the BRI for their business is certainly worthwhile.
Grace K. S. Ho is a partner with Olympic Consultants, Hong Kong, focusing on food and hospitality business development. As a former general manager of a restaurant chain based in Hong Kong, she has more than 25 years of experience in food-related businesses. She is a certified hospitality educator and an adjunct faculty member in various higher education institutions, teaching hospitality and business management and marketing related subjects. Grace obtained her doctor of hotel and tourism management and master of science in hospitality and tourism management degrees from Hong Kong Polytechnic University, master of business administration degree from City University of Hong Kong, and bachelor of arts degree from the University of Hong Kong. She has published several research papers in peer-reviewed hospitality management journals.