The ambitious One Belt, One Road initiative undertaken by China, is a way to create a 21st century revival of the ancient Silk Road trade route. Most view the project as creating infrastructure over land and shipping routes close to the Asian continent.
Yet, with Australia growing in importance as a trade partner, China is looking at ways to extend the project Down Under. Already Australia is a major supplier of commodities to China. And a free trade deal signed last year should cause exports to increase.
In order to secure global supply chains, China Investment Corp (CIC), the country’s $747 billion sovereign wealth fund, is joining a consortium offering to pay $6.4 billion for Australia’s Asciano, the country’s largest ports and rail operator.
“This is part of a process where China does want to control its logistics chains,” Harry Theochari, London-based global head of transport at law firm Norton Rose Fulbright told Reuters. “If you are a big emerging nation that’s very heavily reliant on raw materials from other countries … you’d want to have as much control over the transporting of those fundamental raw materials as you possibly can.”
Cargo handler Qube Holdings leads the CIC consortium, which is offering $9 billion Australian ($6.4 billion) for Asciano. Under the deal, which has been recommended by Asciano’s board, CIC would take a stake in both Asciano’s ports and rail operations.
A potential alternative proposal being discussed involves Qube teaming up with rival Canadian bidder Brookfield Asset Management, reported Reuters. This proposal would leave CIC owning the railways, but not the ports, which Australia views as strategic assets that should remain in local hands.