China’s new futuristic outbound investment development strategy
Chinese vehicles invested in the port city of Colombo and electric air mobility show the way forward as the Belt & Road initiative goes high-tech.
Image: The part funded by China Volocopter
By Chris Devonshire-Ellis
The modus operandi of Chinese overseas investment has evolved as the country expands its strategic development plans and focuses on the âdual circulationâ strategy, two major components of Chinese policy that are starting to have an impact. real about how China invests capital overseas. This represents a further step in the development of the Belt & Road initiative as the basic infrastructure is completed and new technologies can begin to be implemented to take advantage of the construction.
For example, the port city of Colombo in Sri Lanka is currently just a parcel of land – but it is all reclaimed land from the sea and has just received its quality certifications. With the ground now solid and the drainage, energy, and invisible communications connectivity in place, vertical construction will soon take place. These will be smart buildings and use Sri Lanka’s abundant sunshine as a source of power, while electric vehicle charging and associated autonomous driving infrastructure are all put in place.
Image: The port city of Colombo today. Soon this district will look like the CBD of Singapore.
A debt trap? Barely – China’s Harbor Engineering (CHEC) has invested $ 1.4 billion to rehabilitate 269 hectares. But real estate development, including commercial, financial, hotel, residential and social infrastructure, is now accelerating. This money is not a loan and is intended to give both CHEC and the government of Sri Lanka (which did not invest in the project but have a minority stake) dividends. These come in several forms:
Real estate development
The Colombo port city complex has several different building blocks and includes commercial land in the form of port facilities, a special economic zone, connections to the nearby international airport, and commercial office buildings.
Designated plots of land and construction sites are already sold or leased, with these revenues shared between CHEC and the Sri Lankan government. Foreign investors, including contractors and developers, are now bidding for these and will construct many of the buildings needed and then rent and / or sell them. Sri Lankan taxes, stamp duties, and utilities will charge for all services required to maintain these buildings.
The idea is to transform CPC into a Singapore-style financial services hub, both by attracting back office operations from Singapore itself and making CPC a financial services hub for South Asia. South (Afghanistan, Bangladesh, Bhutan, India, Iran, Maldives, Myanmar, Nepal, Pakistan and Thailand). A memorandum of understanding with the Colombo Stock Exchange was agreed and a law was passed to allow CPC to operate as a financial services center.
Some assets in CPC and elsewhere will also be packaged and listed on the main Colombo stock exchange, meaning that parts of China’s Belt & Road Initiative infrastructure will eventually end up in the hands of private investors. The idea is not new, it was developed by the Singaporean holding companies Temasek, which advised the Sri Lankan government on the structuring of this project. Our previous report on this subject is available here.
Of course, other companies will also be attracted to support this leading South Asian financial services initiative. All will be required to pay taxes and related amounts to the Sri Lankan government. An independent PwC report estimated that the project would create more than 200,000 jobs and contribute approximately US $ 11.8 billion to Sri Lanka’s annual GDP. Where is the debt trap?
Image: The Lilium eVTOL jet
Getting around futuristic cities like the port city of Colombo will be radically different from now on. China has been a major investor in EV technologies, particularly in the production of EV batteries and electric air mobility. Interestingly, these Chinese investments were made with foreign partners, with China taking minority stakes.
The eVTOL Lilium Jet is possible in part if TenCent invests a 14% share of a $ 240 million funding round in 2020. Chinese firms’ involvement in new tech ventures both helps spread the costs and development risks, and also enables future access to the huge middle-class consumer market – still growing and estimated at 1.2 billion by 2025.
The full story of China’s investment in the Lilium Jet can be found in the next issue of Investment research in Asia, to be released next week, and which discusses Chinese investments abroad in new technologies, with case studies on biotechnology, electric vehicles and electric air mobility. Free copies can be requested in advance here.
Lilium isn’t the only futuristic air mobility company. Volocopter – pictured at the start of the Shanghai flyby – is originally a German company, but now has significant Chinese investments – and when it is finally listed it will see returns on that investment capital that are many times greater. Again, the full story is in the upcoming issue of Asia Investment Research, but the entire company is estimated to be worth billions. China will build some for the Chengdu domestic market in collaboration with Geely, while the company has also partnered with ride-sharing company Grab to conduct a joint feasibility study on the prospect of offering airborne rides in Northeast Asia. South East. Test flights have already been carried out in Singapore.
This new wave of outward technical investment is a new feature of the Belt and Road initiative and the types of projects Chinese investors are currently considering. With the heavy lifting of many infrastructure projects – such as the port city of Colombo – now complete, the next step will be to invest more in Belt and Road Tech.
The next issue of Asia Investment Research offers six case studies on this topic, as well as information on positioning companies to attract investment from Chinese minorities – useful for accessing development capital and later entering the Chinese consumer market. . All roads continue to lead to Beijing. Politicians and businesses who deny this will find themselves on the wrong side of history.
This article originally appeared on Silk Road Briefing on Tuesday, December 7, 2021 and has been adapted from that article.
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