Onward Trajectory for China’s Belt Road

March 16, 2018, 11:47 a.m.

The increasing traction of China’s Belt Road Initiative has been highlighted in Knight Frank’s recently released Wealth Report 2018.

The Wealth Report 2018 was launched earlier this month and provides insight into the latest research and trends of global real estate and the investments of the world’s wealthiest individuals.

Also known as the Maritime Silk Road, the BRI was launched in 2013 as an economic development strategy to strengthen China’a global trading reach in Asia, Europa and Africa and has also gained momentum in Fiji with a marked rise of Chinese-backed real estate project, tourism property developments and support from the Fijian Government via its Look North Policy.

“The BRI – which is scheduled to be complete by 2049 – will provide a platform for new trade routes, economic links and business networks across six economic corridors from China to Central and South Asia, the Middle East and Europe and along a maritime route from South-East Asia and Oceania to the Middle East, Africa and Europe.”

Knight Frank noted that the BRI now spans 69 countries and encompassed around 60 per cent of the world’s population and 40 per cent of global GDP.

The report said the majority of BRI countries have already undergone rapid modernisation and urbanisation, with the need for investment in roads, railways, ports, airports, pipelines and technology infrastructure growing rapidly.

“At the same time, the growth of new domestic and multinational companies in the BRI is also attracting Chinese investment, with merger and acquisition activity growing significantly year on year. For many Chinese firms, the BRI will become a core part of their business strategy and, increasingly, Chinese brands will become global.”

It is expecting considerable development of built environments alongside the BRI through infrastructure, logistics and new urban settlements.

“The initiative will drive substantial new capital investment alongside a major increase in the activity of Chinese businesses that will bring exciting prospects for development, investment and value growth.”

New Zealand, Singapore, Qatar, Estonia and Malaysia were highlighted as locations that score highly on Knight New Frontier Report’s Belt and Road Development Index, out of the 69 countries named as part of the initiative.

“There will be significant benefits for those real estate owners who can identify the right assets and harness the momentum that the BRI will undoubtedly bring.”

Australia was ranked amongst the top locations that exemplify key trends, with Knight Frank emphasizing that global demographics and changing consumption trends make farmland an investment sector to watch and that on the doorstep of the fastest-growing middle class in history, the country offers tempting opportunities for those wanting to invest in the most tangible asset of all- agriculture.

It is estimated that population growth, land degradation, the impact of climate change and lack of access to water will require an additional cropping area equivalent to three times the size of France by 2030.”

“Where and what to invest in will very much depend on an individual’s attitude to risk and their investment horizon. For those looking for large-scale land holdings with security of tenure, top-quality management, significant energy and environmental diversification potential, and convenient access to the world’s fastest-growing food market – by 2030 Asia’s “consuming class” is set to rise by 1.6 billion people – Australia ticks all the boxes.”

The Wealth Report 2018 notes that at 56 per cent, property is the second most popular investment that typically make up portfolio allocations of ultra-high-net-worth individuals (UHNWIs), compared to assets such as cash, gold and bonds.

Appetite for real estate continues to increase globally as investors grapple with the global low-yield, low-return environment as well as showing signs of shifting allocations away from some fund types such as hedge funds. In addition, there are worries around perceptions of stretched valuations across many publicly traded bonds, while record-breaking equity markets are making some nervous.”

The consultancy says that as a result, money is moving towards alternate investment, with the high yield of real estate making it a prime target for a large proportion of this capital.