Citi reported on Tuesday that China will rush infrastructure projects as it pursues its Belt and Road initiative as the trade tensions with the United States continues. The report noted the benefit of Chinese companies and other sectors that include mining and transportation from the development of the initiative.
The Belt and Road Initiative is the flagship foreign policy program of President Xi Jinping. It was announced in 2013 and its goal is to recreate and modernize ancient Silk Road trade routes. The initiative plans to connect not less than 60 nations in Asia, Europe, Africa, and the Middle East in a series of interconnected roads, rails, ports.
Citi said that China has elevated the program to a top National strategy. China's initiative increased the tensions with the U.S. The United States critics the strategy claiming that the projects are used to expand China's influence in other nations that will participate in the initiative.
According to a Citi analyst, China will likely "escalate the loan and shorten the project approval" process to reach the pace of the construction of the infrastructure to diversify trade and economic activities away from the United States. Citi said that they believe that the initiative will primarily benefit the railway sector given that China has an edge with other nations in terms of technology and cost in railway infrastructure. Citi noted the construction of power plants, telecommunications facilities and ports will also increase.
The analysis also emphasized that the benefit of Chinese firms from the initiative pointing the China Railway Group and China Railway construction as an example. According to Citi, CRRC, a Chinese train manufacturer and China Railway Signal & Communication, an equipment maker, will also benefit from the construction of the projects. CRRC produces utility vehicles like railroad cars, wagons, and coaches.
Citi said that the see near-term opportunities for sectors like commodity and mining, transportation and logistics, as well as finance. The U.S. bank also suggested that China might modify the initiative into a "kinder, gentler" version to pacify its critics.
The bank said that China will face challenges during their implementation of the initiative that includes the heavy reliance on the U.S. dollar in order to fund the infrastructure projects.
