Blog

  • 17 Jul 2018 by Global Chamber Denver

    The One Belt One Road Initiative (BRI), launched by Xi Jinping in 2013, is evidence of China’s expanding ambitions to increase its geopolitical presence and further establish its status as a geopolitical powerhouse. The extended, cross-continental reach of this project, paired with its link to China’s historical silk road is in line with Xi Jinping’s focus on Chinese rejuvenation, and presents immense economic opportunities for both China and all countries involved.

     

    If the BRI is successful, China will have helped to establish the necessary infrastructure to help create an economic network stretching across multiple continents. China has already promised $4 trillion of investments in 65 countries, spanning across Asia and even reaching central Europe and parts of Africa. These countries contain 70 percent of the world’s population, 55 percent of the world’s GNP, and 75 percent of the world’s energy reserves [1]. China hopes that its investments will help to improve and aid in the development of infrastructure throughout regions critical to the BRI, making China a driving force of regional economic prosperity.

     

    There is a global need for infrastructure development, and China’s BRI has the potential to provide loans and projects to fill this void. If completed, China’s OBOR will help construct and improve transportation networks throughout several continents, and create a network directly linking Asia, Europe, and Africa. These projects appeal to countries that are lacking in domestic infrastructure needed to facilitate trade and draw in international business. China has provided loans that improve roads, railways, and ports, all crucial pieces of infrastructure that can help develop economic growth.

     

    These projects are significant for the more than just the physical structures that they will create—the majority of BRI projects are funded through Chinese sponsored loans, and a significant amount of the contractors used to complete the projects are Chinese companies. Several countries are eager to accept loans from China to develop their own their local infrastructure, with the hopes of improving the prospects of their domestic economies. However the status and repayment of these loans has the potential to have lasting implications on China’s stake in key infrastructure throughout the region.

     

    Chinese entities are often willing to provide loans that are deemed too risky by Major Development Banks. Chinese loans in these cases often come with high interest rates, which can present a risk for the lender. Countries that accept these loans run the risk that they will not be able to repay their loan according to the original terms. These cases can present opportunities for China to achieve more that just a financial stake in infrastructure projects. For example, when Sri Lanka was unable to pay the interest on its $1.3 billion loan, China was willing to take equity in the port the loan funded. [2] These terms have given China a vested stake in Sri Lankan infrastructure that will extend beyond the repayment of the loan.

     

    Some critics warn that if Xi Jinping is not careful, China risks overextending its resources and capabilities throughout the region. Although China has successfully implemented mass infrastructure development domestically, bringing these strategies into an international context presents more factors and risks to be considered. Not all Chinese infrastructure projects have been well received by local populations, and there are several instances of local populations pushing back against Chinese investment projects due to claims of poor compliance with environmental standards and unfair labor practices. [3] Although many of these instances exist outside the scope of the BRI, these tensions show that Chinese led projects are not immune to risks and setbacks due to pushback from local populations, and that a warm reception to the BRI is not guaranteed.

     

    A successfully implemented BRI could have immense long-term impacts on the region, increasing China’s international influence, and economic ties throughout Asia, Europe, and Africa. It is no doubt that the BRI has the potential to create increased economic opportunities for several countries through the creation of much needed infrastructure, however the success and lasting economic impact of these projects is not yet set in stone and will be influenced by the varied economic and political factors of each country involved.

    - Kathryn Walsh

    [1] https://thediplomat.com/2018/06/what-does-chinas-belt-and-road-initiative-mean-for-us-grand-strategy/

    [2] https://www.csis.org/analysis/chinas-belt-and-road-initiative-five-years-later-0

    [3] https://www.cfr.org/backgrounder/china-africa

    [4] https://www.brookings.edu/research/chinas-one-belt-one-road-initiative-a-view-from-the-united-states/

    [5] https://thediplomat.com/2018/04/the-risks-of-one-belt-one-road-for-chinas-neighbors/

     

  • 17 Jul 2018 by Nick Carpenter

    Recently, the news has been awash with reports about tariffs and trade barriers enacted by President Trump’s administration. It seems that week after week there is talk about new trade restrictions with the European Union and Canada. On the other side of the world, hangs the “trade war” with China, a set of tariffs enacted by the Trump Administration and retaliatory tariffs enacted by the Chinese government in response. There has been endless analysis from economists, politicians, and the like. Most of this analysis has been done in terms of political fallout or theoretical economic principles. Very little of this has gotten to the heart of how these tariffs will impact businesses and individuals.  Last week, the Chamber of Commerce of the United States released a report that laid out the projected cost of the Trump Administration’s tariffs and tariffs that will be implemented in retaliation by the numbers in each state. Though the report did include all 50 states, this article will be focusing on overviewing the report’s projections for Colorado. If you would like to know the figures for other states, that information is available here CCUSA website for the figures for other states.

     

    Colorado’s trading partners that the Trump administration has enacted tariffs on are Canada, China, the European Union, and Mexico. Specific industries have also been singled out for tariffs and trade barriers such as aluminum, food, cosmetics, and raw materials.

     

    For trade between Colorado and Canada, the new tariffs impact food companies, aluminum production, and cosmetics. In total, the new tariffs are projected to cost Colorado $50,653,642.  Tariffs on exported food items such as bread and pastries will cost $13,536,293. Tariffs on aluminum products will loose $9,046,224 and soap exports tariffs will cost $5,501,031.

     

     Colorado’s exports to China that will be impacted by the new tariffs fall in aluminum exports, meat exports, and vehicle exports and will cost $30,310,164 in total. Tariffs on aluminum exports to China will cost $29,111,373. Meat exports will cost $272,139, while vehicle export tariffs will cost $201,750.

     

    Tariffs imposed on the European Union, will primarily impact iron ore, steel, motorcycle components, whisky and will cost the state a total of $8,246,390.  Iron ore and steel exports will cost $4,822,794. Tariffs on components used in motorcycles will cost $1,123,744 while tariffs on whiskey exports will cost $624,743.

     

    Tariffs on products exported to Mexico—One of Colorado’s largest trading partners—will be significantly more costly. In total, new tariffs on goods exported to Mexico will cost Colorado $187,658,359. The food industry will be affected the most.  Non-frozen meat products, cheese products, and frozen meet products being targeted. New tariffs on non-frozen meat will cost $105,838,309, on cheese $35,927,033 and on frozen products $15,833,694.

     

    In total all of these tariffs will cost the state $ 276,868,555. The report also raises significant concerns over what the new tariffs will do to Colorado’s job market. According to the CCUSA, Colorado has 733,900 jobs that are supported by global trade. These jobs are at risk because they rely on global sales of the products listed above. If sales of these products go down due to the rising prices, it could put all of those jobs in jeopardy.

     

     

  • 10 Jul 2018 by Chad Prather

    In today’s globalized economy, international investment matters now more than ever.  With recent events such as the Greek government debt crisis and the development of the Brexit movement, all eyes are on the European Union.  Despite the controversial aura that surrounds these events, the European Union still proves to be an attractive opportunity for investors around the world.  One of the biggest advantages with the European Union is that “the investment policy of the EU is tilted more towards providing investors with a kind of stability and legal certainty coupled with an environment conductive to carry out business and in accordance with the international rules.”  The European Union has proven itself to be an international hotspot for foreign direct investment (FDI).

    As one can recall, foreign direct investment is when businesses or individual’s setup or buy a company abroad.  Impressively, the European Union “is both the largest provider and destination of FDI in the world, measured by stocks and flows.”  Statistics show that international investments into the European Union are worth €5.4 trillion and directly support 7.6 million jobs within the economic community.  On top of this, European Union investors abroad are worth about €6.9 trillion and support and additional 14.4 million jobs abroad.  This is why international investment matters so much.  Join Global Chamber Denver on August 29th and 30th to meet and discuss the next step for U.S. trade with the European Union.