INTERNATIONAL ARBITRATION 1/3LY
AN INTERVIEW WITH MICHAEL EVERY 05
POL I T I C AL RES I S TANCE The OBOR initiative is of course part of China’s effort to deal with a slowing domestic economy and recognises that the recent globalisation phenomenon is engendering distress in some quarters. Donald Trump, the future US President, has made some characteristically forceful statements about the nation’s trading relationship with states such as China. Earlier this year, Theresa May, the UK Prime Minister delayed a decision on whether to allow the China-backed Hinkley Point nuclear project to go ahead over concerns about the security implications of the Chinese investment. This political backdrop is likely to have an ongoing influence on cross-border trade and commercial transactions. In light of the collapse in global demand for commodities and other goods, which has impacted economies such as China, the environment is even more tense. “We’ve seen from the past how disruptive a sudden drop in exports is for these kind of externally-driven economies,” says Every. “Any slowdown in global trade growth hits them extremely hard. In a nutshell, Asia can no longer expect to export its way to growth off of the back of the Western middle class; domestic demand is going to have to become a much more important driver in Asia, and trade a larger one – relatively – in the West. Otherwise, risks rise of either another economic or political shock.” OBOR is likely to become a fundamental part of China’s efforts to see the RMB become more ubiquitous around the world, but Every expects China to maintain a much broader investment and lending strategy into developing economies as it seeks to ensure a steady supply of “key agricultural/food inputs”.
Last year, China and Brazil agreed a series of trade and investment deals worth billions, which included an emphasis on improving Brazil’s infrastructure, such as a USD 10 billion rail project. Earlier this year, Petroleo Brasileiro (Petrobras), Brazil’s flagship oil and gas company, received a USD 10 billion loan from China Development Bank, as China sought to insure its existing and future supplies of crude oil. Similar deals have been struck with other Latin American nations such as Venezuela, and trade between Brazil and China has ballooned from USD 6.5 billion in 2003 to USD 83.3 billion in 2012. Agreements of this nature are certainly welcome, particularly for nations like Brazil that are under fiscal pressure and have suffered a series of political and corruption scandals. But Every says that those dealing with China should be alert to its motivations so as to avoid disputes further down the line. “All recipient countries will be happy to get new roads and rail, but there can be strings attached.” With China essentially putting up the money, it will understandably hold the balance of power in negotiations and counterparties will need to stay alert to ensure they protect their key interests. INTRA - A S I A AND TRANS - CONT INENT INVES TMENT At another level, China has shown a willingness to invest in and to lend to developing economies that other nations have been reluctant to engage with. It is part of a growing trend for investment and trade to bypass the traditional money centres. China is one instance, but the rise of the ASEAN region and India in cross-border trade and investment is another example. These create new commercial and contractual relationships that don’t always follow classic structures. Parties to such agreements will typically have to work doubly hard to protect their interests.
CHINA HA S SHOWN A WILL INGNESS TO INVES T IN AND LEND TO DE VELOP ING ECONOMIES THAT OTHER NAT IONS HAVE BEEN RELUCTANT TO ENGAGE WI TH .
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