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The New Silk Road

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60 countries, 65% of the global population,

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One Belt One Road is China's ambitious infrastructure project

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But it is also expensive and controversial.

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China says it is going to start a new age of inclusive

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But others are worried that Beijing will use these economic investments

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to tilt the global balance of power in its favour.

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So, will the new Silk Road reshape global trade or is this just

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Welcome to Talking Business. I'm Karishma Vaswani.

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China's new Silk Road is the brainchild of

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It builds on ancient Eurasian trading routes but the scale

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of his new vision is nothing short of astounding.

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So, let's take a look at just what it is.

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It is made up of two main trading corridors, one overland called

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the Silk Road Economic Belt, and the other by sea,

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The idea to build roads, railways, ports, and create a financial

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is structure and free trade zones all along these routes.

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There is also a key parallel project, the China

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You can see the port, water, right over here.

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It is not only just direct maritime routes into Africa

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and the Middle East but it also potentially gives China

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control over some 40% of the world's energy supplies.

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Now, a big part of it is also creating faster more direct routes

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And building a free trade zones and commercial

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infrastructure along the way, like in Khorgos, along

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And, lastly, here in South-East Asia, China is funding

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a railway and port project in Malaysia, dams in Myanmar,

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and a high-speed bullet train in Indonesia,

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The two big questions really are, is it going to take off?

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And is China's big plan really as in official and benign

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Well, we've got a great panel of experts joining us

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Peter Chan is Professor at the University of

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Jonathan Woetzel is director of the McKinsey Global Institute

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and instrumental in building McKinsey's China

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And Nina Yang is Ascendas-Singbridge's CEO

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for sustainable urban development with more than 25 years of urban

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Thank you all for joining us for this discussion

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To begin with, it is a massive project, as we have just

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Jonathan, if you look at historically where many Asian

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companies have been able to get their financing,

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Asian countries for infrastructure projects, it has been

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the multilateral Western institutions that have done this.

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With One Belt One Road, it will be Chinese dominated,

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the Chinese lead plan, or a multilateral institution

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that will end up funding a lot of these projects.

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Well, actually, I think most of the funding will be by national

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finance so sovereign funds of the country, but, yes,

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there will be some investments that come from China

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or through the multilaterals like the New Development Bank

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I think that it is less important, actually, than the actual

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What we see now is Chinese companies globalising with One Belt One Road,

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say you have large construction groups that the state

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developers but also the small, private during companies,

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that is really the bottom line inpact, an avenue, if you will,

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Peter, I want to bring you into the discussion now,

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and talk about what this means for the region.

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I know we have said that Asia has always traded within the region

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but China will have a much bigger presence, as a result

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Indeed, China's One Belt One Road is, to me, the coming-of-age of

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If not regional, it is a global superpower.

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It is the manifestation of Chinese ambition,

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not just as an economic superpower but also eventually cultural,

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geopolitical, and also a military regional power.

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So, the impact, but consequences for us smaller nations in Asia

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I think the important component of One Belt One Road is this

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And connectivity takes a lot of money to create.

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Physical infrastructure is the most important thing.

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Without this physical infrastructure connectivity,

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the One Belt One Road will go back to the seventh century,

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So, who is going to invest in this One Belt One Road,

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connectivity building up the infrastructure chat?

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I would say that a lot of countries along this One Belt One Road

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in the past do not have that singular ability to pull

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this thing together, and with this initiative,

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there is suddenly a reason for all these companies

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and countries to come together, and a lot more viability

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for their infrastructure project and a lot of viability for funding

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to come in to build this infrastructure.

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So, aside from China trying to assert its influence

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which is often reported that way, I think that from a is this

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point of view, there is a reason now for city is,

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full countries along that One Belt One Road to have commercial

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viability for trade to happen and for business

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Peter, can you try to help explain why there is this suspicion

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in countries like Malaysia, where you are from,

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certainly across the region, while many of the nations

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are welcoming of this, there is still a bit of reluctance

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and almost antagonism about it as well.

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Let me begin by saying that we do need Chinese investment,

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we do need Chinese leadership, we do need that kind of direct

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investment and that is coming into Malaysia to generate

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Having said that, there is an aspect of the Chinese entrepreneurship

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It has this image problem of being unethical and little bit predatory,

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and doesn't really have real transfer of technology, downstream

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So, on that score, China really needs to work

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But the bigger picture, the net benefit is there,

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we do need Chinese investment, but there are some significant

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changes that China needs to make along the way.

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Jonathan, on the point of transfer of technology,

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I know that you work very closely with the government in China

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That when China goes in to build a massive infrastructure project,

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there is no transfer limited transfer of technology?

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I think China has learned from some of those experiences

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where the approach was let's get 10,000 Chinese workers to fly

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It just became very painful and expensive.

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So, actually, if you are a Chinese company in Kenya or Ethiopian now,

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you are really going to think hard about how many Chinese

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people you want to bring with you because everyone you bring

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costs you four or five times what the equivalent

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So, there is a big shift from the Chinese mindset to how

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to be more effective at creating a local presence, getting

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The technology part is a different challenge.

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It is the same problem that Western companies faced in China

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when they came to China, now Chinese companies faced the same

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thing going to developing countries, which is that the supply

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infrastructure is in there. The technology is backwards.

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And that is a lot of work and a lot of investment.

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China is looking for partners, local partners, looking for other months,

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but also looking for private sector companies that can work with them

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We are the going to move the chat on to where the money

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for this ambitious project is going to come from next.

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To all intents and purposes, China is the sole funder

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of One Belt One Road projects at the moment, but that

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At some point, we will have to look at where the money to make this

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whole project a reality is going to come from.

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And part of the question people are asking now is,

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will the money come, especially from private investors

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We will talk about that in a moment, but for now let's take a small break

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with a light-hearted look at this topic with our comedy

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Chinese Chinese foreign direct investment in Europe,

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but how best to represent Chinese money abroad without

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Nothing says Chinese money abroad more eloquently than at giant

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distribution centre on the edge of a British city.

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This is part of Airport City being built on the edge of Manchester,

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The investment made by China may be less visible but it is growing

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and it is becoming strategically significant in the global economy.

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There has been a huge increase in foreign direct investment

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That has reached nearly 46 billion in Europe.

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The Chinese money flowing into Europe is growing fast,

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and while Britain and Germany are at the forefront

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as recipients of that money, we Irish are no slouches ourselves.

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We get the fifth largest slice of the Chinese FTI pie.

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Private investors in China now represent over three quarters

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It reflects a shift over the last year or two to away from investment

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by the big state-owned enterprises towards investors by private

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Most obviously, we have had the investment in nuclear

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from China, but also distribution centres in Manchester,

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and other utilities sectors, and that will continue.

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And, plus, the future, will we become more aware of Chinese

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investment in the real economy or will it remain tucked away

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China's model of investment overseas has shifted a lot over

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Especially after Donald Trump's collection, I think the focus

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will move from the United States to Europe, especially to the UK

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because China sees the UK and find strategic assets that China wants

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to acquire, such as intellectual property, such as advanced

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manufacturing techniques, such as a way of

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So, those will be the things that China will have great interest

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Then, of course, there is the Chinese investment

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in football clubs and football players, or the giant

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waste of money, depending on your point of view.

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China is more broadly integrated now into the global economy,

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and that is why the investment, particularly in Europe

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and in the US is turning to world-class businesses.

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And, of course, that most potent symbol of integration

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to the global economy, English football league clubs.

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Take the example of the Northern Powerhouse.

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The fourth quarter of 2015 alone, there is over ?2.3 billion

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of investment from China and much of that, 80% of that, actually,

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And this has been spent on mostly China, such as the construction

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Right, that's just about wraps up our whistle top tour of Chinese

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investment in Europe, and we didn't even have to resort

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Now, that is what I call a great wall.

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Well, if you enjoyed that, you can find more on our website.

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Now, actor the topic at hand, China's One Belt One Road.

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The Chinese and has pledged $1 trillion to the project and has

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set up the Asian Infrastructure Investment Aank, the AIIB,

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to help fund roads, ports, and highways.

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But China can't do this alone, so where will the money come from?

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Our panel of experts today are Alexander Capri,

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who is currently senior fellow at the National University

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of Singapore Business Schools, Jonathan Woetzel from McKinsey,

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and Nina Yang from Ascendas-Singbridge.

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Thank you again for joining us for this discussion.

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Let's kick up on the point of financing.

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Well, look, deployment of capital is a very important issue here.

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And transparency, good governance, there is a need for building

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in that area, and I think that is where Western

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companies can come in, not just the consultancy firms,

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not just the accountancy firms, but even the financial

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intermediaries can come in, the law firms can come in and assist

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I think the other part of the capacity building

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So, when we think about One Belt One Road, we think

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about roads and bridges and so forth, but we actually need

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to be looking at the soft infrastructure that has to go

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And that is why you have companies like Ali Baba building these very

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impressive economist platforms and global trade platforms working

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with a lot of open source firms, a lot of IT firms are coming

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So, the capacity building will not happen without world

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Jonathan, I know you have done a lot of work with the Chinese government,

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and as well with a lot of these digital firms that are working

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on the IT structure, as Alex was just mentioning.

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Is China more open to this kind of knowledge transfer, if you will?

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One Belt One Road is an open source that form, it is available,

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What China is doing now is a big call on all the companies

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and all the banks, and saying, I would like to be there

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but there is this problem here or there is this

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China is saying, we are going to be there.

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Now, you can be part of it, but you have to to be part of it,

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It is open source but people have to invest, they have to commit.

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Nina, the suspicion that we were discussing earlier,

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amongst some parties, will that be a deterrent

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I think there is an open invitation for all companies to come along

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because they recognise that there is a lack

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of capability across the region and also in Chinese firms.

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It is an open invitation to come to China.

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I think the Wall Street Journal earlier reported that US companies

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So, suspicions aside, I think for companies and corporations,

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you have to get engaged, and this is the best

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Alex, when companies look at engaging with One Belt One Road,

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one of the issues you talked about is regulation.

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How did they manage navigate around this area

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I think a very interesting example is DHL.

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If you look at what DHL is doing on the belt, and think about it,

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you think about trade facilitation, how many countries district have

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to pass through from China all the way to Turkey

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It is got to go through all the 'stan countries, right?

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It is got to go through Iran, it has got to go through

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Now, one would think that you would have a lack of uniformity

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in the application of customs procedures, which is the case.

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But DHL has been very successful in using technology,

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pre-clearance, in other words, transmitting customs related

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information in advance of the freight coming through.

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They have been able to whisk that cargo through, apart

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But imagine that with high-speed rail going all the way,

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and having pre-clearance and electronic platforms

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taking care of customs, I think it is going to be fairly seamless,

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and I think DHL is a very good example of that.

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Jonathan, the risk to China, though, if it ends up loaning billions

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of dollars worth of investments to countries all projects that

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aren't able to make a profit, or aren't able to pay them act?

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The infrastructure, in and of itself, does

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not actually do much for you. What matters is economic activities.

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The Chinese government and Chinese companies are all very

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focused on how to create more economic activity.

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How do we make it more productive? And who is going to do that with us?

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That is the opportunity now for Western countries.

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And $1 trillion sounds like a big number, but in the infrastructure

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Actually, emerging Asian needs about $20 trillion

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Most of that money is go to have to come out

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of those Asian and African and Middle Eastern

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They are going to be the ones investing.

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China doesn't want to be seen as a free lunch.

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There is no incentive then for people to step up their game,

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and that is the big bet for One Belt One Road.

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Will they become true partners to China and the rest of the world?

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Well, that leaves us bury nicely to the way forward.

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The discussion about whether or not this week bet will act to repay off.

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I think there are at least four areas that we can talk about.

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The first is this physical infrastructure, logistics,

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And that one is a reasonably commercial decision.

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And the second area will be trade that became possible

:19:30.:19:32.

The third area will be exchanged at people, community level,

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in terms of education exchanges, cultural exchanges, very

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There are tonnes of collaborations being spoken about and being

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followed through, exchanges that can happen at community level.

:19:50.:19:55.

And the last area is what we spoke about, between governments

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and specifically on capability building and exchanges in terms

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of government to have it, learning from each other,

:20:05.:20:08.

For instant, there is a project called the connectivity initiative,

:20:09.:20:15.

it is about exchanges in all these for areas, specifically leading

:20:16.:20:23.

from logistics aviation and government to government

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exchanges in terms of capability building.

:20:27.:20:38.

So, it is a much broader kind of benefit that we can come up with.

:20:39.:20:42.

It is too narrow to define whether there will be a commercial

:20:43.:20:45.

And this is how we will look at the One Belt One Road.

:20:46.:20:50.

And being in Asia for so many years and having done business in China,

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I think it is an invitation for everybody to jump

:20:54.:20:56.

There are all these challenges, but there are also potential

:20:57.:21:00.

What is your take, Alex? I would agree.

:21:01.:21:07.

There are a couple of things we need to keep our eyes on.

:21:08.:21:13.

Everybody was breathing a sigh of relief last week

:21:14.:21:18.

when Donald Trump announced he was going to recognise

:21:19.:21:22.

I think collectively, the whole region breathed a sigh of relief.

:21:23.:21:32.

This is not a big bang, this is a gradual development.

:21:33.:21:36.

One thing we didn't talk about is the development of tourism.

:21:37.:21:40.

I think tourism is another possibility along the whole

:21:41.:21:46.

Hotels, and the tourist industry, in general.

:21:47.:21:54.

I think, overall, even if the belt and the road don't overlap

:21:55.:21:59.

to their full potential, even if we get a portion of it and,

:22:00.:22:04.

I still think it was a great deal for Western companies

:22:05.:22:06.

Jonathan, on that point of the potential for

:22:07.:22:11.

Winston Churchill said, I am an optimist, there doesn't

:22:12.:22:16.

seem to be much point in being anything else.

:22:17.:22:22.

But that said, it is a long-term challenge.

:22:23.:22:26.

This is 60% of the world's population that has

:22:27.:22:28.

How do you get 60% of the population to have 60% of the world's GDP?

:22:29.:22:34.

That is not going to happen tomorrow, but I

:22:35.:22:36.

believe it will happen. Excellent.

:22:37.:22:38.

Thank you very much to all of you for the joining

:22:39.:22:41.

us for this discussion on the One Belt One Road initiative.

:22:42.:22:44.

That is it for this season of Talking Business.

:22:45.:22:46.

Thank you so much for joining us throughout all of our shows.

:22:47.:22:52.

We have enjoyed bringing them to you.

:22:53.:23:27.

Some breaking news and the weather front. Macro to on the other side of

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the Atlantic is heading this way. It

:23:36.:23:36.

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