Can we gain from China’s Silk Road policy? | PKF

The recent visit by Malta Prime Minister to China saw the signing of another memorandum of undertaking. This was a renewal of a previous one signed five years ago and encapsulates the wishes of China in its unique policy to trade and negotiate more business with other countries. The historical trade agreement was signed in Shanghai, a city that since the fourteenth century was rapidly developed into a world financial centre and now boasts of the largest container port in Asia.

Malta and China agreed to strengthen bilateral cooperation in both banking and insurance, and from the China side the MOU encourages Chinese financial institutions, namely banks, insurances companies and companies operating in the Fintech sector, to establish offices in Malta. Given the recent closure of three small banks in Malta there is never a better time to strengthen our banking platform. Such business expansion by Chinese investors has already been functioning successfully in both Ireland and Luxembourg.

Muscat was speaking to an audience of politicians, investors and big leaders of multinational and high-profile companies, such as Jack Yun Ma – Chairman of the Alibaba group and Microsoft co-founder Bill Gates. Muscat said that Malta is the first country in the world with legislation to regulate Blockchain. He referred to artificial intelligence and the fact that new technologies will change the labour market nature, even in Malta, as from next year robots will be assisting Maltese doctors and surgeons during operations on Maltese patients.

One may wish to reflect on how the smallest nation in the EU can ever stand up to sign such an ambitious trade agreement with China. This comes at an opportune time when China is expeditiously building its own version of Silicon Valley in Shenzhen, located near the Pearl River Delta. At this technical hub, China is pouring millions to lure talented persons to team up as start-ups aided with venture capital and subsidised laboratories looking into cutting-edge robotics, AI and related technologies.

Be that as it may, Muscat proudly announced his country’s pioneering task to regulate Blockchain development and later on focus on exoteric matters related to A.I. He said “there are problems and great challenges in such a development. Malta is proposing regulations and regularisation and as a country, we will have a framework on this”. Reading The Economist, one meets with an interesting article about China’s relentless expansion in trade and manufacturing abilities.

China’s policy over the past centuries helped to establish the Silk Road, a network of trade routes that linked China to Central Asia and the Arab world. The name came from one of China’s most important exports – silk. In 2013, China’s President, Xi Jinping, proposed establishing a modern equivalent, creating a network of railways, roads, pipelines, and utility grids that would link China and central Asia, West Asia, and parts of South Asia.

This initiative baptised as “One Belt and One Road (OBOR)” comprises more than physical connections. It aims to create the world’s largest platform for economic cooperation, including policy coordination, trade and financing collaboration, and social and cultural co-operation. As a result of the global recession in 2008 many Western economies stalled and reduced orders from China.

This resulted in overcapacity in China ranging from real estate to steel and cement. Not a moment too soon, to revive trade President Xi Jinping allocated a massive sum of $900 billion to fund a global initiative and one expects that this money will be generating a positive multiplayer effect on a number of countries.

This begs the question – how can Malta with its troupe of consulting firms stand to gain in this China initiative? The potential for professional services open to hundreds of new China companies is exciting. To exploit this opportunity, PKF International had invited a number of its offices to a grand meeting in Duisburg (Germany) at the offices of PKF Fasselt Schlage to discuss strategy with their Chinese counterparts. These meetings will be inviting Chinese investors to two-day conferences in Beijing held annually to discuss business potential with consultants from various PKF offices.

A lead partner in this group is the New York office. Founded in 1891, PKF O’Connor Davies has evolved from an accounting firm to become a team of high-calibre professionals that provides a global, growing client base with comprehensive accounting, auditing, tax and specialised management advisory services at the highest level. 

A welcome addition to the growing list of PKF offices in Hong Kong, Beijing and Shanghai is ZG. At the Duisburg meeting, Gengchun Yao, Chairman at ZG, expressed his satisfaction that the organisation of a China desk at each PKF office will contribute towards a successful implementation of OBOR. In his opinion, the China desk at each of the participating firms underpins a unity of purpose. As stated earlier, China is also very much active in the research and development field. Its Pearl River Delta is a melting pot for a multitude of research companies all trying to emulate the success of Silicon Valley.

This is an extension of the OBOR policy as it plans to export expertise in a number of unique products and services to face competition in the West.

Can Malta interest Chinese investment to set up an extension of their R&D initiative into Europe following the renewal of the MOU signed in Shanghai? This is not a pipe dream as Malta has attracted substantial investment through Shanghai Electric thanks to the negotiation skills of energy minister Konrad Mizzi who, in collaboration with other interlocutors, succeeded to convert the ageing Delimara power station to run on modern technology using LNG. 

Another unique example of OBOR put in action is China’s Ningbo Shipping Exchange. This is collaborating with the Baltic Exchange on a container index of rates between China and the Middle East, the Mediterranean, and Europe. In conclusion, can our country, albeit small and lacking indigenous materials rise to the occasion and surf gloriously over the tide to seize this opportunity?

No doubt, the drive to set up a joint research centre will help unite the collective faculties of our universities, technical institutes and medical schools to pursue cutting-edge research particularly in oncology, Artificial Intelligence, Blockchain, nanotechnology and bioscience subjects. Boldly embarking on this ambitious roadmap will shine a light to guide us along a shadowy tunnel at the end of which we can underpin GDP growth and improve our competitiveness level. Only thus can we grasp the opportunities that the Silk roadmap is offering.