8 risks to the Silk Road Fund
- By Wang Tianling
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E-mail China.org.cn, November 24, 2014
In the 21st century, economic nationalism has become a threat to many international energy enterprises. Bolivia's nationalization of energy assets in 2006, Mongolia's rejection of China Shenhua Energy's participation in the development of Tavan Tolgoi (the world's largest untapped coal deposit) in 2011 and Indonesia's ban on exports of unprocessed ore in 2014 have all had a negative impact on international enterprises from China and from many other countries.
In the long-term, it will be important to understand the roots of economic nationalism in order to prevent Chinese enterprises from falling prey to it.
Seventh, China must avoid the risks brought about by local trade unions.
Deciding how to tackle trade unions is a headache for Chinese enterprises, no matter whether they are operating in developed or developing countries. SAIC Motor Corporation failed to invest in South Korean automaker SsangYong Motor Company partly because it was unable to effectively work together with the local trade union.
To ensure sound development of the Silk Road Fund projects, Chinese enterprises must fully understand the differences between Chinese and foreign trade unions, carefully fulfill their social responsibilities, and maintain a sound relationship with local trade unions that upholds the spirit of mutual benefit and equality under the law.
Eighth, China must avoid the risks posed by a lack of knowledge about local markets and a lack of experience running international projects.
Chinese enterprises should clearly differentiate between short-term emergency needs and long-term rigid demands to avoid the embarrassment and waste caused by "newly-built roads with no cars on them" and "no ships docked in newly-built ports."
In 2010, when the China Railway Construction Corp finished a light rail project in Saudi Arabia, it registered a net loss of 4.1 billion yuan (US$669 million). Clearly there is also a great need for Chinese enterprises to improve internal management, learn common international practices and exercise strict control over financial budgets in compliance with international norms.
So how can we make full use of the US$40 billion Silk Road Fund? We must regard it as a long-term global trade campaign that is aimed at creating both political and economic effects. Efforts should be made to prevent and simultaneously manage risks in politics, diplomacy and business.
The writer is a senior research fellow at the Institute of Modern International Relations, Tsinghua University.
This article was translated by Chen Xia. Its original version was published in Chinese.
Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.
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