Page 11 - bne IntelliNews Russia Country report May 2017

was up 0.7% in March, but consumer credits are still only just starting to climb off the floor following the total collapse in the business sector in the last two years and won’t have any impact on growth for quite a while yet.
All-in-all, total fixed investments fell by about 12% in real terms in 2014–2016 and the ratio of fixed investments to GDP is just 21%. For Russia to return to the boom years fixed investment needs to grow by 20% a year.
The villain in this story is the government, as investments at all levels – state, regions and municipalities – are all shrinking. In 2015–2016, investments of domestic private and joint private-state firms also declined. Even the fully foreign-owned firms are hunkering down to wait for an economic U-turn and have cut investment plans sharply.
Only privately owned domestic firms are making any sort of investment and now account for 55% of total investments against the government’s less than 20% share. This is the point of attack for the Stolypin Club and could make a big difference to growth prospects at the cost of ramping up Russia’s currently minuscule state debt. But it would be a big gamble. We will just have to wait and see if Putin is willing to throw the dice or stick with his old friend, “Mr Prudence”, Kudrin.
2.4 China to invest $124bn in One Belt, One Road
Beijing is investing a massive $124bn into the One Belt, One Road initiative, a global project to invest into infrastructure and trade networks across four continents, President Xi Jinping announced at an international summit on May 14.
China has touted the initiative as a way to boost global trade and development since Xi first unveiled it back in 2013. It comprises six major land corridors across the Eurasian landmass as well as the so-called Maritime Silk Road from China to Europe, which links in parts of South Asia, East and North Africa, Australasia and Southeast Europe.
Construction of new roads, railways, ports and other infrastructure along these routes are being funded by Chinese state banks and built by Chinese construction companies alongside local firms.
The $124bn figure is mostly not new investment, but at the summit Xi said China would invest an additional RMB100tn (€13.3trn) into the existing Silk Road Fund, and a total of RMB380mn from two state banks – the China Development Bank and Export-Import Bank (Eximbank) of China – as well as a further RMN60bn in aid mainly to developing countries along the trade routes. The timeframe for these investments was not disclosed.
In a statement quoted by the Chinese government's press service, Wang Yiwei, a professor at the School of International Relations at Renmin University of China, said the project would link countries and regions that account for about 60% of the world’s population and 30% of global GDP.
In his opening address to the summit, Xi stressed the benefits of increased trade and prosperity to countries along the routes, talking of a “new model of co-operation and mutual benefit”, while his deputy Zhang Gaoli spoke of the
11 RUSSIA Country Report May 2017 www.intellinews.com