In 2013, Chinese President Xi Jinping announced mammoth plans for his ‘One Belt, One Road’ policy. This has China looking to revive the silk trade routes of centuries in the past.
The plan involves the ‘Silk Road Economic Belt’ and the ‘21st Century Maritime Road’. The ambitious scheme will cross more than 65 countries. The plan seeks to gain diplomatic allies and open up markets between Asia and Europe.
President Xi has called it ‘the project of the century’. The initiative is motivated by a desire to spur economic growth in nearby countries. This will provide a growing market for trade.
It’s the largest overseas investment plan ever launched by a single country.
The land-based projects are the belt. China wishes to finance and build a massive road and railway infrastructure across central Asia and the Middle East, through to Europe.
Train travel at a speed of 300 km per hour is part of Beijing’s big sell. China claims an ability to build high-speed railways more cheaply than its competitors. It wishes to share its engineering technology to spearhead global ambitions.
China has put a great deal of emphasis on high-speed rail. The scale is enormous. A Washington-based think-tank, the Center for Strategic and International Studies, estimates the total value of 18 Chinese rail schemes at US$143 billion.
The railway scheme alone is bigger than the Marshall Plan which helped revive Europe after the Second World War. And rail is only part of the project.
The ocean-based projects are the maritime road component of ‘One Belt, One Road’. These projects seek to link China to ports in Southeast Asia, east Africa and the Mediterranean by sea.
The maritime road project is not some pie-in-the-sky fantasy. In just the past year, Chinese companies have announced plans to either purchase or invest in nine overseas ports. The total value is estimated at more than US$20 billion, a sharp rise from the US$9.97 billion spent in the previous year.
Four separate ports in Malaysia are involved. Chinese companies have announced a total of US$11.62 billion in investments for the Melaka Gateway, as well as ports in Kuala Linggi, Penang and Kuantan.
There is also a plan for a maritime route from China to Europe via the Arctic Ocean. It could cut the travel time by several days. The project involves a deep water shipping port in Russia, and a railway into Siberia.
Chinese Deputy Premier Wang Yang led a visit with Poly Group, a state-owned enterprise, to the proposed Russian port in Arkhangelsk.
The Arctic route attracted interest from elsewhere in the region. China Merchants, a port operator, wants to build a big new container port in Klaipeda, Lithuania. There have also been talks about Chinese investment in a Norwegian port on the Barents Sea and two ports in Iceland.
Since the plan has started, there has been growing interest from companies in China and partner countries to participate in new projects. What once seemed an ambitious plan has quickly become a reality.
Multinational companies are also keen for a slice of the action. Businesses like Caterpillar Inc [NYSE:CAT] and General Electric Co [NYSE:GE] have experience in dealing with China. They see the Silk Road initiative as an excellent long term opportunity.
Some countries worry that Beijing is using its business policy for a strategic agenda. Ownership of ports could allow them to collect intelligence. They could even be used to host military forces.
When it was formally announced by President Xi in 2013, One Belt, One Road was motivated by the need for continued economic growth.
Exports to developed countries and spending on infrastructure at home were previously the biggest drivers of Chinese growth. These are seen as less viable in the longer term.
China believes that building infrastructure in nearby developing countries will boost their economies. As these developing nations grow, they will become bigger customers for Chinese exports.
Another reason for the plan is to provide Chinese companies with experience to become globally competitive. Finance their growth and give them the time to learn management techniques. Then they could become champions for China at a global level.
At Cycles, Trends and Forecasts, Phil Anderson has often talked about projects that become ‘the biggest’ or ‘the best’ in history. He reckons it’s typical for where we stand in the cycle.
The plans are in place now. The projects are often completed right at the peak of the cycle.
In order to help in his forecasts, Phil developed his Grand Cycle Theory.
The Grand Cycle Theory is the perfect tool for forecasting market moves, especially real estate and global stock markets.
Phil Anderson has summed it up in a picture that’s worth a thousand words:
This removes any niggle of doubt about property moving in cycles.
Phil has used his theory to accurately predict market moves time and time again.
It flies in the face of conventional wisdom on Collins Street and Wall Street.
Imagine the benefit of having such foresight. Back in 2004, Phil warned of the ‘winner’s curse’ phase about to unfold. This proved to be the final couple of years into the peak of the cycle.
It’s when real estate buyers leapfrogged each other, chasing higher and higher prices into the peak in 2007. All of it financed by reckless lending from the banks. Low income earners were able to borrow $1 million without any hope of being able to repay.
Importantly, Phil also forecast the best time for buyers to step back into the market to buy real estate and stocks. Years ahead of the event, he said real estate prices would bottom out in 2010/2011. And the stock market would bottom out a year or two beforehand.
History proves this foresight was remarkable.
Go here for a brand new video demonstration of how you can use the theory to predict market moves.
Lead Researcher, Cycles, Trends & Forecasts