China: The Challenges Faced By Chinese And African Businesses Under The "One Belt, One Road" Framework

Last Updated: 4 December 2015
Article by Kenny Chiu and Wil Huang

Since the new Chinese government came into power in 2013, it has proposed a host of new strategies to realise the "Chinese Dream". One of the more significant strategies, led personally by President Xi Jinping, is known as "One Belt, One Road" plan, which will have a huge, undeniable impact on the global economy over the next 10 years.

The One Belt, One Road strategy aims to provide a comprehensive roadmap for partnership between China and the rest of the world. Businesses are emphasised as the main components of the development of this new strategy, and China, Asia, Africa and Europe are the main theatres in which this strategy aims to play out. Global cooperation and interaction act as the foundation for the One Belt, One Road plan and, if the strategy can achieve its desired effect, it will reshuffle the deck of cards that is the global economy.

The Chinese Communist Party and government have stated that the One Belt, One Road strategy is not only a means for China to perform in the global economy, but is also a symphony between it and partnering countries. This is a clear indication that no single country can succeed if it is a soloist in the One Belt, One Road strategy. As such, as it currently stands, the strategy is not simple and requires a lot of commitment to make it a success. It also comes with its own set of opportunities and unique challenges.

According to the concept of the One Belt, One Road strategy, Africa will be one of the main sites of focus. However, many sub-Saharan countries have some of the slowest growth rates in the world, and many are politically unstable and lacking in social governance, which bring a lot of uncertainty to the strategy. As part of their cooperation, Chinese and African businesses must acknowledge that they will face unprecedented challenges, in addition to opportunities.

Under the One Belt, One Road framework, China will need to become the engine that drives the global economy. Being the second largest economy in the world, China has already surpassed the United States and is growing stronger daily. In the foreseeable future, China will still play a leading role in the global economy, which will enable it to provide a huge financial platform to ensure that the One Belt, One Road strategy is realised. The growth of the Chinese economy will also bring about the necessary finance, technical skills, equipment, innovation and human capital and, as such, will present many profitable opportunities.

Secondly, under the auspices of peace and development, the cooperation and interaction between nations will become the new norm and will bring about immense rewards, such as the amalgamation of resources, the utilisation and training of personnel, growth of existing markets, investment, and the speedy development of infrastructure. There are many commercial opportunities that Chinese and African businesses should seize with both hands. Africa remains the last untapped opportunity, particularly southern and eastern Africa and, although both areas are starting behind many countries, they have huge market potential that should not be underestimated. The One Belt, One Road strategy will certainly reinvigorate eastern and southern Africa and will create a new source of motivation. Chinese and African businesses must recognise this possibility and utilise opportunities as they present themselves.

Achieving the One Belt, One Road strategy will not be easy nor without resistance. As such, the challenges and pressures must be assessed in full before the strategy can be realised. Chinese and African business will face three main types of challenges. The first lies within the problems that China and Africa face internally, as neither are ranked highly for the quality of their manufactured goods. On many levels, the standards between Chinese and African businesses are on par and the possibility of one covering the shortfall of the other is high. This naturally reduces the efficiency of cooperation. In addition, because Chinese and African businesses are different in terms of their culture, management models, operating styles, etc, the uncertainty that arises during cooperation exists. The second challenge is political risk. Although China is strengthening its development of the economy and social upliftment, political and social unrest in southern and eastern Africa poses a big risk to the One Belt, One Road strategy. The businesses of the two regions must develop all-round forward thinking to address these challenges, as political risks and associated challenges should not be underestimated. The third challenge is the risk to safety. The One Belt, One Road strategy is not only an economic strategy, but also a political one that involves comprehensive strategic decisions. As such, the risk to safety cannot be disregarded. Chinese and African businesses must consider the negative impact created by states that have a tainted view and wish to prejudice the strategy, as well as the risk of cyber-crime and espionage and the obvious threat of terrorism. All in all, Chinese and African businesses must recognise the potential risks associated with the One Belt, One Road strategy and must not underestimate or disregard such risks.

Reducing these risks will be the work of Chinese and African businesses alike. In terms of the internal issues they both face, Chinese and African businesses must improve communication with each another, understand each other's cultures, be forthcoming with one another, advance interests together, and maintain good relations for the sake of the bigger goal. Regarding the political risks, Chinese and African businesses must acquire a comprehensive understanding, prepare and plan, take the necessary precautions, and take the advice of states under advisement to reduce such risks. In terms of the legal risk, both Chinese and African businesses must establish a strong awareness of applicable laws within particular jurisdictions and, under the support of the state, protect foreign investment through the application of the law. Furthermore, both must maintain a suitable business management environment.

As highlighted above, the implementation of the One Belt, One Road strategy in Africa comes with both opportunities and challenges. As the main building blocks of the market, Chinese and African businesses must strike a balance between caution and boldness to seize the opportunities, face the challenges and, ultimately, enjoy the fruits of cooperation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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