by Paul Starr [1]、Monique Carroll   King & Wood Mallesons

Our previous edition of Crossing Borders highlighted the Belt and Road Initiative (BRI). So important and ongoing is this People’s Republic of China (PRC) worldwide initiative, that the PRC has organised an annual Summit (Summit) in the Hong Kong Special Administrative Region (Hong Kong SAR) to report on progress and where to next. What follows is a report from the 2017 Summit (held in September) and KWM’s recommendations for making your BRI projects successful.

From Vision to Action – It is really happening

The theme of the Summit was ‘From Vision to Action’ with PRC government representatives sharing that over 600 contracts have already been signed by PRC enterprises for projects in BRI countries.

Our own case load also indicates that the ‘Action’ phase has well and truly commenced. Our PRC offices are involved with 22 BRI projects. Our Hong Kong Projects and Infrastructure Team is paying frequent visits to Ghana, where we are advising a PRC client on expansion of its mining operations and its proposed development on a Build-Own-Transfer basis of rail infrastructure in that country. (Purists might scoff that Ghana is not officially on the BRI – but that just demonstrates how quickly the concept is growing.)

Our Hong Kong Finance Team has assisted with: the formation of the China-UAE Investment Corporation Fund; he drafting of a term loan facility for a Laos project; advice on a USD 900 million syndicated acquisition financing in Brazil; a bank guarantee facility in Greece; and bridge financing in Europe. Our Mainland China offices are assisting on BRI ventures as far flung as Pakistan (nuclear,wind and solar power), Argentina (nuclear power), Ethiopia (power transmission and distribution), Laos and Thailand (railways), Russia (railway, cable export and hydropower), Kazakhstan (gas pipelines) and Myanmar (oil and gas).

A number of leading international companies are already involved in BRI projects both within and outside Australia. As more companies develop their understanding of how the BRI links to them, we expect to see these numbers grow.[2]

How to successfully implement ‘Action’

Three major themes were consistently raised at the Summit as essential to successful transition from Vision to Action.

1. Sustainable = success

Exposure to high levels of political, financial and legal risk is a ubiquitous feature of many BRI projects given that the projects are based in ‘foreign’ jurisdictions many of which are developing economies.

Summit speakers reiterated comments in a report from McKinsey & Company, proposing that BRI project participants adopt a comprehensive risk management mechanism to achieve project sustainability, at both macro and microeconomic levels.[3] At the macro level, this will entail the PRC government establishing a risk management think tank and using independent and transparent risk modelling. At the micro level, it means a localised risk management system. Summit speakers also noted that financing requirements from multilaterals, banks and export credit agencies can play a key role in implementation of risk mitigation mechanisms.

This is consistent with KWM’s experience. The most successful cross-border investments are those which are implemented in conjunction with a considered and tailored risk management plan. This plan puts project leaders in the best position to encounter any commercial difficulties that arise as well as any social and regulatory issues.

We have also seen PRC companies being strongly encouraged by the PRC government to adopt comprehensive risk management tools including corporate social responsibility practices. Most recently, this has been demonstrated by the Asian Infrastructure Investment Bank (AIIB) which provides regional financing and acts as an investment platform for infrastructure development in Asia. The AIIB now requires that the environmental and social risks of projects which it finances are identified and managed in accordance with its Environmental and Social Framework. The PRC’s Ministry of Commerce (MOFCOM) has also released guidelines and regulations for PRC companies in respect of their responsibilities to support sustainable development, environmental protection and anti-bribery in cross-border investments.[4]

Risk management policies and procedures based on these principles can therefore be expected to be the new ‘normal’ for BRI projects.

2. Private sector involvement

As Victor Fung, Chairman of the Fung Group, summarized at the Summit: “China cannot do it alone. It has to be a public-private sector cooperation internationally”.[5] While much work to date has focused on securing inter-governmental cooperation – for example through bilateral cooperation agreements – the private sector is increasingly seen as a key partner to work with the PRC government to realise the BRI. This is in recognition of the need to leverage the industry, project management and risk management expertise of private enterprise to ensure successful projects. More significantly, while the PRC has already committed USD900 billion to the BRI, it is expected that private capital will be needed to fund up to 80% of the estimated USD5 billion total price tag of projects across the 69 BRI countries.

McKinsey & Company recommends that PRC companies adopt the highest standards of risk management during investment and implementation to safeguard sustainability as well as the following focus areas: (i) establishing a dynamic project sourcing team with good industry and project management skills; (ii) standardisation of the project screening process; (iii) establishing a public–private functional committee incorporating market-based governance systems to increase transparency, project flow and access to funding; and (iv) cost-efficient project and post-investment management. These are all areas in which the private sector can contribute.

It is also clear from the Summit that the ‘private’ contribution to the BRI is not exclusive to large enterprises. Young business leaders at the Summit also explained how the BRI offers a platform for small and mediumsized enterprises (SMEs), and especially those in digital technology and big data, to expand into lucrative regional or even global markets. While risk management is a particularly acute issue for SMEs trying to access BRI markets, these delegates noted that governments can again play a facilitative role by implementing trade agreements, special economic zones and incentive programs.

The growing involvement of private enterprise is also consistent with our experience as set out above under ‘Vision to Action’.

3. Regulatory harmonization

Policymakers from various BRI countries speaking at the Summit consistently referred to the importance of regulatory harmonisation and harmonisation of dispute resolution infrastructure. Harmonisation of regulations and policy coordination between participating nations is essential to the success of the BRI, where projects often transcend political and jurisdictional boundaries. Consistency and predictability are key elements to providing a stable and encouraging investment environment.

The groundwork for this harmonisation has already been laid through the business and trade cooperation agreements and memoranda of understanding signed between the PRC and 70 countries and international organisations. At the Summit, the PRC government expressed its intention to continue to enter into free trade agreements containing investment promotion and protection provisions.

In addition to this, Summit speakers stressed the importance of having available a robust, internationally recognised dispute resolution regime, such as international arbitration based in Hong Kong SAR. In this context Hong Kong SAR was recognised as a leading dispute resolution hub in the Asia Pacific region able to produce arbitral awards enforceable in over 150 jurisdictions, including Mainland China.

KWM recommends that parties consider and obtain advice as to the proposed dispute resolution mechanism in their contracts, the governing law of the contracts and if there are any likely impediments to enforcement of the contract from a legal or practical perspective. Dispute resolution clauses that are legally unenforceable or unenforceable due to some other practical impediment significantly devalue and undermine your contractual rights. This review should also include consideration of political risk and sovereign immunity if the project involves government approvals, facilitation or participation.


To ensure you are in the best position to successfully action BRI projects, we recommend you contact your legal advisers to:

  • conduct an independent review of your risk assessments and compliance framework to ensure it adequately deals with the commercial, social and environmental risks;
  • advise on the enforceability and adequacy of the dispute resolution procedure under the proposed contracts;
  • advise on management of political risk and sovereign immunity issues;
  • develop culture and corporate governance guidelines; and
  • draft contractual and project documentation.

[1] Paul Starr was a guest speaker at the Summit.

[2] KWM is a key sponsor and supporter of the Australia-China Belt & Road Initiative, a private sector led initiative formed to ensure that Australian companies are given the opportunity, and are in a positon, to make informed decisions around participation in BRI projects.

[3] Belt and Road Summit, ‘Executive Summary from the 2nd Belt and Road Summit Hong Kong, 11 September 2017’, available at:

[4] See Guidelines on the Environmental Protection in Outbound Investment and Cooperation (《对外投资合作环境保护指南》) and Key Working Points on Regulating the Conduct of Enterprises Engaged in Overseas Business and Preventing Overseas Commercial Bribery (《2013年商务部规范企业境外经营行为,防治境外商业贿赂工作要点》). See also

[5] Above n 3, 31.