How does the "Belt and Road Initiative" affect investments in Europe?

The "One Belt, One Road" initiative

"One Belt, One Road" is a grand initiative introduced by Chinese President Xi Jinping in September 2013, aimed at reviving the historically significant Silk Road. From 2014 to 2017, international analysts, including specialists from the American Enterprise Institute, estimated the investments in the project to be approximately340 billion dollars.

Funding and sources of funds

Currently, the main source of funding for this project is China's national currency reserves; however, in the future, the country's leadership plans to attract more private investors from both local and foreign markets.

Goals and structure of the program

The main goal of this initiative is to create sustainable economic ties between different Eurasian states. The structure of the "One Belt, One Road" program includes two key aspects:

• "Belt"— a land route connecting China and Europe;
• "The Way."— sea routes through the Indian Ocean.

Infrastructure projects

As part of this program, active work is being carried out on the construction and modernization of infrastructure, as well as in the fields of energy and mineral extraction. This includes not only railways but also pipelines, warehouses, and port facilities. Almost all of China's actions in these sectors of the economy can be attributed to the "Belt and Road" initiative, as specific projects have not yet been publicly announced.

Impact on the real estate market

Among the obvious pluses, such as increased trade turnover and the creation of new jobs, the initiative is also interesting for investors in the real estate sector. Experts from the international agency Knight Frank have calculated that from September 2013 to October 2017, more than 1.5 billion dollars were invested in the countries involved in the project.10 billion dollarsin various segments of real estate, including:

• construction projects;
• office and retail space;
• residential real estate;
• logistics;
• hotels.

Geography of participants

According to the available data, about80 countriesAgreements have been signed for the "One Belt, One Road" project. Eastern Europe includes about a third of all partners, which exceeds the number of partner countries in five regions:

• Asia;
• Middle East;
• Africa;
• Oceania.

Strategic ports

As part of the implementation of the "One Belt, One Road" initiative, China has acquired significant stakes in the port terminals of the Greek port of Piraeus and the Spanish port of Noatum. The construction of the "Power of Siberia" gas pipeline, which will supply Russian gas to China, is also in its final stages, and work continues on the creation of a trans-Asian railway corridor connecting China with the United Kingdom.

Investment outlook

Knight Frank experts suggest that China's initiative will attract significant volumes of investment into European real estate. Developing countries in Asia often do not provide investors with the necessary transparency in legal matters related to transactions, as well as quality assets with the desired liquidity and stability, making European markets more appealing. According to information from the largest Chinese online portal for selling overseas real estate, in 2017, Chinese investments in European residential and commercial real estate reached25.6 billion dollars.

The growth of Chinese investments in the European economy

By 2016, Chinese investment increased by 228%, attracting the attention of many nations with investors looking for solid opportunities in the real estate segment.

Czech Republic: an attractive market for Chinese investors

In this context, the Czech Republic holds a special place, where Chinese investments have become a significant part of the foreign financial game plan. The Czech Republic ranks fourth among China's main trading partners and is second in terms of imports.

• In 2016, Czech exports to China totaled $1.5 billion.
• Imports from China reached 13 billion dollars.

These figures were presented in a report by the analytical company Knight Frank. The countries have signed about 30 bilateral agreements focused on trade, which has also contributed to a significant increase in tourist flows from China to the Czech Republic.

The aforementioned activity prompted China Eastern Airlines to establish direct flights between Shanghai and Prague.

CEFC investments in the Czech Republic

The Chinese energy company CEFC decided to take advantage of the growing interest of tourists and acquired several famous hotels in Prague, among them:

• Mandarin Oriental
• Le Palais Art Hotel

In addition, CEFC has become the owner of a large office complex called Florentinum, as well as numerous shops and restaurants in the city center.

According to Anna Kurjanovic, an investment expert, when considering potential profitable real estate in the Czech Republic, it is necessary to consider not only popular hotels, but also the possibility of investing in office buildings:

“Numerous international companies are looking for office spaces in Prague, as the economic conditions here are quite favorable: there is stable economic growth, a low unemployment rate, and an available workforce,” shares an expert. “Currently, there is a shortage of quality office spaces in Prague, which is leading to an increase in rental rates.”

Poland: the territory of Chinese investments

Poland is also seeing an increase in investments from China. In 2016, net investments from China into the Polish economy significantly exceeded the total amount of all investments over the past 16 years.

One of the key projects between China and Poland has been the design and construction of a railway line connecting Chengdu and Łódź, which was launched in 2013. In 2015, this line was extended to the port city of Xiamen in southeastern China, contributing to a 30% increase in trade turnover between the two countries.

Chinese investments in Polish real estate

As for the Polish real estate market, Chinese investments are actively making their presence felt in this segment as well. Just recently, one of the largest Chinese banks participated in the refinancing of office buildings in the country.

At the end of 2017, the logistics platform Logicor, which has an impressive asset portfolio, was acquired by a Chinese investment corporation for a substantial $14.4 billion.

Investing in real estate in Poland

Due to positive developments and numerous investment opportunities, investors looking to invest in real estate should pay attention to modern office complexes located in cities such as Warsaw, Krakow, and Gdansk, as well as to logistics centers and retail spaces situated in the central areas of major Polish cities.

Chinese investment in the UK

The United Kingdom serves as a platform for numerous large transactions in the real estate market, where Chinese entrepreneurs are actively involved. China is interested in a variety of sectors of the UK economy, including finance, energy, healthcare, and, of course, real estate.

In 2013, the Chinese development company Advanced Business Park signed a contract to build office and residential properties in the Royal Albert Dock area. Four years later, in 2017, the Chinese investor made one of the most significant deals in the British market by acquiring the famous skyscraper The Leadenhall Building, which at that time became the most notable event.

According to statistics, in 2017, about 30% of Chinese investments in overseas commercial real estate were directed towards the United Kingdom.

Key points for investors

Experts believe that the key aspects to look out for when investing in UK commercial real estate are:

• Economic stabilityeven despite Brexit;
• The rapid development of electronic commerce.

The UK ranks second in Europe in terms of sales for companies such as Amazon and first in terms of data for online retailers such as Apple, Dixons Carphone and Next. Thus, experts recommend focusing your investments on office space in central zones, as well as retail and logistics facilities.

Greek real estate market

As for the Greek real estate market, Athens is becoming particularly attractive to Chinese tourists. In 2016, the Chinese company Cosco, one of the leading port operators globally, acquired 51% of the shares in the Greek port of Piraeus, which plays a significant role in the "New Silk Road." The deal amounted to 280.5 million euros.

After five years from the signing of the contract, Cosco will receive an additional 16% of the shares for 88 million euros, and during this time, the company is expected to invest 300 million euros in upgrading the ship repair facilities and the port's logistics infrastructure.

Project "Ellinikon"

Another significant Chinese investment project in Greece is the reconstruction of the Elinnikon Airport, which is being carried out by the Chinese conglomerate Fosun Group. Within the framework of this project it is planned to build comfortable residential complexes, modern hotels and recreational areas. In addition, it is planned to extend the life of the current Olympic facilities and build new sports facilities.

Interest in the Greek real estate market has significantly increased in recent years due to the boom in tourism observed in the country. According to data from the Bank of Greece, over 30 million foreign tourists visited the country in 2017, which undoubtedly contributes to the development of the real estate sector and attracts new investments.

Conclusion

The topic of "One Belt, One Road" is an amazing example of how international cooperation can change the economic map of the world and open new horizons for the development of countries. When I started studying this ambitious project launched by Xi Jinping in 2013, I was struck by the scale and diversity of opportunities it offers both for China and for the participating countries.

Over the course of the project, impressive results have been achieved: a huge amount of money has been invested in the development of infrastructure, energy and mining, which is already beginning to bear fruit in the form of new jobs and increased turnover. And this is just the beginning. I look at the situation with hope: the integration of Eurasian countries is energizing economic growth and creating a platform for private investment that can fundamentally change local markets.

Real estate investments

I find it particularly interesting that under the "Belt and Road" initiative, Chinese investments are flowing not only into infrastructure but also into real estate, which opens up new opportunities for investors. For example, the growing interest in the Czech market and the increase in Chinese investments in it indicate that European countries are becoming important players in this initiative.

Poland as a strategic partner

Poland, with its strategic location between Eastern and Western Europe, also attracts the attention of Chinese investors. The launch of the railway corridor and the increase in trade volumes between the two countries are clear evidence that this approach is indeed working and brings real benefits to both sides.

Risks and expectations

However, like any large-scale project, the "Belt and Road Initiative" requires careful monitoring of the risks associated with the sustainability of participating countries, as well as the transparency of investments. I believe that in 10-20 years, we will witness how this project not only transforms infrastructure but also creates new economic relationships that will make our world more interconnected and prosperous.

Final thoughts

Thus, I think it is important to continue to analyze and discuss all aspects of this ambitious initiative, as its impact on the global economy and each individual country will continue to grow. And in this context, cooperation and dialog between countries will play a key role in shaping a positive future for all project participants.