Infrastructure build-out is one of the key themes driving long-term growth opportunities, especially in emerging markets. We’re seeing a range of government initiatives to promote infrastructure spending, including in Indonesia, India, and the Philippines. However, the single most important of the infrastructure initiatives underway is likely China’s One Belt, One Road project (OBOR). The goal of this ambitious strategic infrastructure plan is to connect people and trade between Asia and Europe through a series of roads, rail, ports, waterways and gas pipelines, including a high-speed train line from China to Europe that will cut travel time from 21 to 2 days. OBOR is envisioned as a way to enhance China’s ability to export the overcapacity of materials, such as steel and cement, while securing more energy resources and increasing trade overall. OBOR also advances China’s drive to establish itself as a global superpower, a key element of its long-term growth story. (For more on this, read my blog.) Figure 1. One Belt, One Road: Advancing China’s Trade Relationships and Connections in the Global Economy “Belt” refers to land-based routes, while “road” refers to ocean-based routes, a reference to the trade routes of the ancient Silk Road.
OBOR is a massive undertaking—it will take years to complete and some parts may not come to fruition. More immediately, however, our global equity team sees OBOR contributing to investment opportunities in the rail sector, where Chinese companies are now better positioned to offer globally competitive products at good prices. Countries around the world are now looking to China to supply key components of new high speed rail lines. We also recently saw Chicago award a $1.3 billion order of train cars to a Chinese company. Over recent years, China has made a concerted effort to broaden its export base beyond commodities and lower-value goods (Figure 2). We have seen Chinese companies grow increasingly proficient and competitive in a number of industries, notably technology. OBOR further supports this trend, providing a tailwind for an increasing array of Chinese companies to reshape what “made in China” means to the global economy. Figure 2. China’s Market Share of U.S. Imports by Value, % Share
Source: JOC.com, “China’s Export Mix Shifts to Higher-End Goods” using data from U.S. Census Bureau, CEIC and Barclays Research. 2010 represents the period from 11/09 through 10/10; 2013 represents the period from 11/12 through 10/13.
The information provided on this website should not be considered financial or investment advice and is general information intended only for wholesale clients ( as defined in the Corporations Act). If you are not a wholesale client, you should exit the website. The content has been prepared without taking into account your personal objectives, financial situations or needs. You should seek personal financial advice before making any financial or investment decisions. Where the website refers to a particular financial product, you should obtain a copy of the relevant product services guide or offer document for wholesale investors before making any decision in relation to the product. Investment returns are not guaranteed as all investments carry some risk. The value of an investment may rise or fall with the changes in the market. Past performance is no guarantee of future performance. This statement relates to any claims made regarding past performance of any Tamim (or associated companies) products. Tamim does not guarantee the accuracy of any information in this website, including information provided by third parties. Information can change without notice and Tamim will endeavour to update this website as soon as practicable after changes. Tamim Funds Management Pty Limited and CTSP Funds Management Pty Ltd trading as Tamim Asset Management and its related entities do not accept responsibility for any inaccuracy or any actions taken in reliance upon this advice. All information provided on this website is correct at the time of writing and is subject to change due to changes in legislation. Please contact Tamim if you wish to confirm the currency of any information on the website.