MARKET SPOTLIGHT
CASHING IN ON CHINA’S COMMITMENTS BY THOMAS TIMLEN
Forward-looking Plans Bode Well for Project Work
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s the only major economy that ended 2020 with a gross domestic product greater than it began the year with, the importance of China to the project cargo sector will not only be maintained, but it is also anticipated to increase. Several drivers are at play that support the view that, even if demand for project cargo transportation does not increase, the current level of demand will at least be sustained. In addition to GDP growth, another driver is China’s Central Committee, which has formulated a five-year plan to guide economic strategy through 2025, combined with a 15-year plan known as “Vision 2035.” Together, these plans form a blueprint for the country’s economic growth model with a focus on innovation, the environment and economic self-sufficiency. Before the five-year plan and Vision 2035 came to light, the project cargo sector was already benefiting from China’s GDP advantage combined with the dual pursuits of renewable energy sources and infrastructure initiatives. Now there is added impetus to push renewable projects: analysis from Wood Mackenzie shows more than US$5 trillion 48 BREAKBULK MAGAZINE www.breakbulk.com
of investments will be needed for China to reach its goal of carbon neutrality by 2060. To reach this, Wood Mackenzie estimates solar, wind and storage capacities will have to increase 11 times to 5,040 gigawatts, or GW, by 2050 compared with 2020 levels.
COMMITMENT TO PROJECTS
The significance of the five-year plan and Vision 2035 in boosting project cargo work is real, according to experts in the region. Chris Devonshire-Ellis, chairman of Dezan Shira & Associates, a specialist firm handling foreign investment into China’s Belt & Road Initiative, told Breakbulk: “China tends to follow through on its plans, although there can be unpredictable bumps along the way caused by unforeseen political, medical or economic issues cropping up. “China has also invested US$4 trillion in the Belt and Road, at least half of which is in countries that have high climate change risk. So, it is aligning its own investments with a need to wean itself off coal and onto other clean energy resources.” On this basis, Devonshire-Ellis feels that the five-year plan and
Vision 2035 will definitely concentrate minds and investments on renewables, boosting demand for the related transport service needs. Although investment in China’s infrastructure and renewable energy initiatives would have continued even without the five-year plan and 15-year strategy papers, DevonshireEllis saw these as force multipliers that bring with them additional stimulus. “The new plan will refine and define how China intends to deal with this, and that, in turn, will be followed by China’s state-owned enterprises and private companies. Other policies can also be expected to support it, such as investment incentives as well as disincentives in certain areas.” The steps taken by China’s Central Committee and the sustained GDP are not the only factors expected to contribute towards continued opportunities for the project cargo transport sector. There are others, namely the Northern Sea Passage and the Regional Comprehensive Economic Partnership, or RCEP, agreement. “The Northern Sea passage will be a game changer, and the new RCEP deal will also have an impact. Look out for potential upcoming ISSUE 1 / 2021
