OECD Business and Finance Outlook 2018
The OECD Business and Finance Outlook is an annual publication that presents unique data and analysis on the trends, both positive and negative, that are shaping tomorrow’s world of business, finance and investment. Using analysis from a wide range of perspectives, this year’s edition addresses connectivity, both among institutions within the global financial system and among countries. Almost a decade on from the 2008 financial crisis, the Outlook examines new risks to financial stability that will put financial reforms to the test, focusing in particular on the normalisation of monetary policy, debt problems and off-balance sheet activity in China. With respect to connectivity among countries, the Outlook examines the new phase of globalisation centred on Asia/Eurasia, using China’s Belt and Road Initiative as a case study. It argues that this ambitious development plan has a number of economic issues to look out for, and that it would be best carried through with transparent “rules of the game” that will help ensure a level playing field for all.
The Belt and Road Initiative in the global trade, investment and finance landscape
The Belt and Road Initiative (BRI) development strategy aims to build connectivity and co-operation across six main economic corridors encompassing China and: Mongolia and Russia; Eurasian countries; Central and West Asia; Pakistan; other countries of the Indian sub-continent; and Indochina. Asia needs USD 26 trillion in infrastructure investment to 2030 (Asian Development Bank, 2017), and China can certainly help to provide some of this. Its investments, by building infrastructure, have positive impacts on countries involved. Mutual benefit is a feature of the BRI which will also help to develop markets for China’s products in the long term and to alleviate industrial excess capacity in the short term. The BRI prioritises hardware (infrastructure) and funding first. This chapter explores and quantifies parts of the BRI strategy, the impact on other BRI-participating economies and some of the implications for OECD countries. China faces internal financial constraints (see Chapter 1), which means that other countries and multilateral institutions (such as the World Bank) will need to be involved to meet the huge funding requirements.