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There are a number of key economic and demographic factors currently at play which are likely to increase the development of new business in Asia for offshore financial centres (OFCs) such as Bermuda, the British Virgin Islands and the Cayman Islands. In particular, the Chinese government is seeking to engineer a policy shift away from an economy fuelled by non-financial sector debt, such as corporate debt and government stimulus, towards a more sustained, quality growth derived from a consumer-driven economy. This rebalancing is also intended to mitigate the volatility of recent years.
In order to effect this planned economic shift, the Chinese government has been implementing measures to encourage investment in sectors including healthcare, insurance, education, social services, utilities and entertainment. These are the fastest growing areas of the Chinese economy, a growth which chimes with the view that China’s burgeoning middle class will be a key economic driver.
Another factor will be the Belt and Road initiative, which the Chinese government intends to use to improve the infrastructure of overland and maritime routes between East and West in order to drive the flow of capital, goods and services. The Belt and Road concept reflects the ancient Silk Road, which transformed international trade and cultural exchanges along a number of intercontinental trade routes. The ‘Belt’ is the land route from China across Central-Asia into Europe and the ‘Road’ will be the maritime route out of China, encompassing South-East Asia, the Indian Sub-Continent, East Africa and the Middle-East and into the Mediterranean. The Belt and Road will give China access to over 65 countries representing more than 60 per cent of the world’s population and around 30 percent of global GDP. Not only will China gain new markets but it will also be in a position to secure key commodities, minerals and energy resources.
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China’s Belt and Road: Offshore Involvement
This article was first published in IFC Economic Report, Winter 2017/18