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Eversheds One Belt One Road (OBOR) Webinar

  • China
  • Hong Kong
  • Other

18-01-2016

Eversheds Head of China corporate practice, Jay Ze, and Hong Kong corporate partner Charles Butcher, explain the initiative and the challenges and opportunities it presents for general counsel.

Overview:

OBOR is the next stage of China’s “Go Out” strategy. It focuses on building networks in over 60 countries across Asia and EMEA to encourage economic development.

• OBOR has two key elements:

1. Land-based “Silk Road Economic Belt” to build and expand land routes through a “Eurasian land bridge” from China’s east coast to Rotterdam and western Europe

2. Sea route “The 21st-Century Maritime Silk Road ” based on historical maritime trading routes running from China’s eastern coast to Europe

 

• OBOR seeks to address three key issues for China:

1. Stimulate less-developed regions in northern and central China

2. Use trade networks to export locally produced steel, cement, shipbuilding, aluminium and flat glass

3. Use US$3 trillion of foreign exchange reserves to underwrite outbound investments

Results to-date

1. Silk Road Fund: a US$40 billion outbound investment fund established by Beijing in December 2014

2. Asian Infrastructure Investment Bank (AIIB): a multilateral development bank that will promote economic integration in Asia and work alongside existing multilateral development banks

3. Significant cooperation and commitment from local governments, banks and enterprises

Significant opportunities exist in a number of sectors including advanced manufacturing, agriculture, e-commerce energy and natural resources, financial and professional services, infrastructure, logistics and transport.

Key issues to consider

1. Chinese outbound investors are concerned over possible issues arising from foreign regulatory approvals

2. Enforceability against Chinese investors over payment obligations

3. Cultural differences as between China and western countries

4. China premium

5. Country-specific risks including the legal and financial challenges of accessing new foreign markets, including political risk, social instability and regional disputes

China inbound investment – why Hong Kong?

• robust legal regime

• friendly tax regime

• RMB capability

• mature capital market

• a familiar gateway for both international investors and Chinese business partners

China outbound investment – why Hong Kong?

• China’s outward FDI now over USD$100 billion and increasing at a compound annual growth rate (CAGR) of 16%

• Almost 60% of China outbound investment flows through Hong Kong

• mature fund raising platform

• capital management simplicity and flexibility

• financial risk management and access to financial services

• robust IP protection regime

• cultural factors – comfortable hub for Chinese and international investors

Recommendations to Chinese and foreign investors

• foreign investors

o conduct thorough due diligence

o understand your Chinese partners and identify any potential obstacles as soon as possible

o engage the right legal advisors

 

• Chinese investors

o undertake detailed feasibility, synergy and cost-benefit analysis

o plan for post-deal implementation and integration

o instruct experienced advisers as soon as possible

 

For more information contact

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