China’s ramp-up of Belt and Road investments plays to Hong Kong’s strengths: HSBC
News Summary
HSBC states that Hong Kong is poised to benefit from mainland China's expanding Belt and Road Initiative (BRI), as new projects increasingly focus on green development, digital transformation, and trade-corridor connectivity. Jing Liu, HSBC's Chief Economist for Greater China, noted that Hong Kong's strengths in green finance and its status as the world's largest offshore yuan hub position it for a larger role as the BRI shifts towards more private sector-led projects, particularly in Southeast Asia and the Middle East. Liu also highlighted that Hong Kong's stablecoin ordinance, aligning with the BRI's growing investments in emerging markets and increased yuan settlement, could support yuan internationalization. She explained that the BRI, initially focused on large overseas infrastructure, has evolved towards "small and beautiful" projects with greater emphasis on green development, digitalization, and high-tech content. HSBC research indicates that the share of Chinese overseas direct investments going to the BRI rose to 25% in the first half of 2025, up from an average of 16% in 2021-2022. Liu anticipates an acceleration in China's overseas investments amidst US-China tariff tensions, which are propelling production closer to end consumers.
Background
The Belt and Road Initiative (BRI), also known as the Silk Road Economic Belt and the 21st-century Maritime Silk Road, is a global infrastructure development strategy launched by China in 2013. It aims to promote connectivity and economic cooperation between China and participating countries across Asia, Europe, Africa, and Latin America through investments in infrastructure, trade, and investment, covering over 150 countries. In recent years, China has refined its BRI strategy due to growing international concerns over debt sustainability and environmental impact, as well as escalating US-China geopolitical tensions. The article notes the initiative has shifted from its initial focus on large-scale infrastructure to "small and beautiful" projects, emphasizing green, digital, and high-tech sectors. This evolution aligns with Hong Kong's strengths as an international financial hub, particularly in green finance and offshore yuan business.
In-Depth AI Insights
What are the deeper motivations behind the strategic adjustments to the Belt and Road Initiative? - China's shift in BRI strategy from large infrastructure to "small and beautiful" projects, with an emphasis on green, digital, and high-tech, is primarily driven by the need to address international criticism over debt sustainability and environmental impact, while enhancing project efficacy and influence. - This adjustment also serves China's strategic interests in a reshaping global supply chain. Amidst ongoing US-China tariff wars and technological competition, moving production closer to end consumers and integrating digital and high-tech components enhances supply chain efficiency and resilience, helping Chinese companies mitigate geopolitical risks in their globalization efforts. - Furthermore, leveraging Hong Kong's green finance and offshore yuan hub status aims to increase the yuan's share in international trade settlement, circumventing certain dollar system limitations and advancing yuan internationalization, which is crucial for a long-term de-dollarization strategy. What does Hong Kong's role in the new phase of BRI mean for investors? - Hong Kong, as an offshore yuan center and green finance hub, will play a pivotal role in the BRI's private sector-led, green, and digital projects. This implies new growth opportunities for Hong Kong's financial services sector, particularly in green bond issuance, sustainable investment products, and cross-border yuan settlement services. - Investors should focus on related financial institutions in Hong Kong, especially banks and FinTech companies with strong footholds in green finance, digital assets (like stablecoins), and cross-border yuan businesses. These areas are likely to benefit from policy support and increased business flows. - Moreover, Hong Kong's role as a bridge connecting mainland China with emerging BRI markets (especially Southeast Asia and the Middle East) will be strengthened, offering financing and advisory services for Chinese and international enterprises seeking to participate in these markets' growth. This could drive synergistic development in Hong Kong's professional services, legal, and accounting sectors. How is the globalization model of Chinese companies evolving amidst continuous US-China tariff tensions in 2025, and what are the potential impacts on global supply chains? - Under persistent tariff pressure from the Trump administration, Chinese companies are accelerating the diversification of their production bases, shifting some capacity to BRI countries to circumvent trade barriers and be closer to end markets. This "nearshoring" or "friendshoring" strategy aims to enhance supply chain resilience and reduce reliance on single markets like the US. - This evolving model will lead to further fragmentation and regionalization of global supply chains. While potentially increasing operational costs in the short term, it contributes to building more resilient and diversified international production networks in the long run. - For investors, this means a need to re-evaluate global manufacturing footprints and logistics costs. Chinese companies with strong operational capabilities or supply chain integration solutions in BRI emerging markets, as well as port, logistics, and industrial park developers providing related services, may present attractive investment opportunities.