PESTLE analysis

1. PESTEL ANALYSIS OF
CHINA'S BELT AND
ROAD INITIATIVE
Usman Mateen 19902
Aisha Shaikh 19283
Vaneeza Naeem 18571
Namika Shaikh 18572
Ahsan Moin 19023

2. WHAT IS PESTEL ANALYSIS?
Pestel analysis is basically a strategic framework that is
used for evaluating the external enviromental factors of a
business by breaking down the pros and cons into
political, economial, social, technological, enviromental
and legal factors. Pestel analysis can be very efficent and
benefical when identifying the risks and opportunities of
any business strategy. It provides a quick understading of
all external pressures that a business might face and talks
about the strategies that would help the business
overcome those pressures.
Political analysis indicate how political development that
might be local or international would affect the strategy
of the business. Political analysis covers all political
variants such as the political system of the countires
involved, government regulations, different laws such as
tax and enviroment protection laws and much more
Economic analysis covers all economical factors that
would affect the business. Economic factors covers a
large span of things including the buying behaviours of
customers, economic condition of the countries involved
such as unemployment rate and inflation, changes in
production and labor market, monetary and fiscal policies
of the government, etc.
Social analysis takes all the social factors under
consideration such as what competitive advantage can a
business possibly get by social changes. Social factors
include religious beliefs of the people living in the
country, education levels of the country, income levels,
lifestyle average, etc.
Technological analysis help us understand how
technology affects the business activities and if that affect
is positive or negative. These factors include automation,
technological incentives, and the rate of change in
technology
Enviromental factors concerns all the ecological impacts
on a business and helps business plan how to adapt
according to the enviromental changes. These factors
include weather conditions, temperature, climate change,
natural disasters and lastly pollution.
Legal analysis is commonly mistaken for political, but they
are quite different as legal analysis indicates legal forces
that define what a business can or cannot do. It refers to
all the laws and regulations that businesses are supposed
to follow.

3. WHAT IS BRI?
• The belt and road initiative was an idea proposed by the Chinese
President Xi in September 2013. Its main concentration was on
connectivity and cooperation between countries primarily in Eurasia.
This belt and road initiative have three main corridors: the first one
starts from China and bounds in Europe, the second one starts from
central Asia and ends at the Persian gulf and lastly, the third one goes
from China to South Asia and from South Asia to the Indian ocean.
• It is, till date one of China's key national strategies that look
forward to developing an infrastructure network of roads, railways,
ports and more. This is a global project that involves more than 60
countries in it and 60% of the world population. It also also said to
have an impact on more than one-third of the global GDP.
PESTEL ANALYSIS OF BRI
• As we can easily tell by the looks of it that this is a huge project
that requires a lot of planning and time. In order to make this a
successful project project Chinese enterprises will have to face a lot of
challenges but at the same time this project can bring a lot of
opportunities for not only Chinese people but people all around the
globe. based on the PESTEL model.
Let's analyze BRI from the following six perspectives

4. Political analysis:
• This project involves almost 60 countries all together. China already has
a friendly relationship with most of the mentioned countries and this
project will benefit Chinese enterprises as they will witness a favorable
political environment. China shares borders with 14 different countries
and although China as crossed US financially it still lacks when
compared with US military. Once China helps other developing
countries grow economically, China will gain support of those countries,
improving the relationship between the government of China and all the
countries involved in the BRI..
• By looking at the current news, China-European union relation are
fragile at the moment as European union has referred to China as
systemic rival but if the situation is handled correctly BRI could result in
better political relations between both states. The political system in
Europe is currently stable and not vulnerable to any political turbulence
which tells us that Chinese enterprises can have a stable and safe
investment environment.
• The governments of certain states will have to put their differences aside
because of BRI in order to benefit their economies which will also result
in less political rivalries.
Political
analysis:

5. Economical analysis:
• BRI can have lots of positive affects on the economy of not only China, but all countries involved in this project. China has excessive capacity
of laborers, and this project has the potential to create job opportunities for millions of Chinese workers which will have a positive affect on
the employment rate of the country. This will also help other nations as this project will be creating job opportunities in many countries
resulting in decrease in unemployment specially in under-developed countries.
• This project aims to expand and strengthen the energy sector in central Asia which is their major source of revenue, this will help recover the
GDP of Central Asia. China itself will also benefit from this as the route planned will give China access to Iran to build a consumer base and
to get access of its oil reserves which will boost up the overall economy of China In the longer run (DILLINGER, 2017).
• According to a research conducted by McKinsey Global Institute, underdeveloped countries such as Siri Lanka, Kenya will benefit greatly by
this project due to the infusion of investments and the return on these investments will also further fuel economic developments in these
nations. On the other hand, although China has an extra-ordinary GDP growth the past few years, the country is still at high profile risk. On top
of it BRI is a very expensive project and needs more investments from foreign countries. China could use this opportunity to to propel its
economic growth as well.
• The developing "exclusive regionalism and protectionism," according to Kiyoyuki Seguchi, director of the Canon Institute, a renowned think
tank in Japan. At the same time, he emphasizes that a successful BRI will provide countries much-needed economic development, making it a
win-win situation for all parties involved.
• In terms of Columbian coffee transitioning into third wave, it is clearly stated that main factor of this movement is coffee itself. Coffee
consumers are mostly in developed markets while the producers are from developing countries. Although there was a growth seen in coffee
market of US up to 193% which benefited growers in Colombia, it still has a very small share in the market. Similarly, Columbian producers
face a lot of hurdles adapting to demands of new type of partnerships. The third wave movement approach is different from the traditional
approach that the Columbian producers are used to which also makes it hard for them to adapt to the new approach as they are not used to it.
Despite all the challenges, the growth in specialty coffee can help generate higher profit margins for Columbian producers.
Economical
analysis:

6. Social analysis:
• The BRI project can benefit many countries socially as it brings along a lot of new opportunities. Many countries are a lot different from
china when it comes to different customs, conventions, religious and social beliefs. So, if chinese enterprises invest they will have to deal with
cultutre conflict as most of them are under develop countries and literacy rate might be low there, due to which they might not support this
project and even raise a voice against it. These differences indicate that chinese enterprises should respect the norms and values of people of
the countries involved in this project in order to avoid rivalries and cias. They should give the individuals their privacy and freedom.
• This project's initiatives are aligned with the Central Asian states' national development objectives, including Kazakhstan's "Road to
Brightness," Tajikistan's "Energy, Transport, and Food," and Turkmenistan's "Strong and Happy Era" (Tai et al, 2016). This has aided in
increasing financial and non-financial cooperation between the United States and China, as well as lowering both parties' financial risks.
• In terms of the third wave movement and Columbian coffee market, The present approach will need to change if Colombia is to prosper in the
single-origin market and if its coffee growers are to benefit from this industry shift. The FNC must adjust to focus on both volume and ultra-
high-end markets at the same time. This change will allow the FNC to keep its purchasing guarantee for the benefit of all Colombian
producers while also providing top-quality producers with a legal pathway to a higher-margin market.
• If BRI is managed properly, this project can be very fruitful for underdeveloped countries such as Bangladesh, as it will profit significantly.
The extension and modernization of several ports, as well as the creation of access roads to them, would offer its industries with convenient
and cost-effective access to China's and India's major markets. This will aid in the country's transformation into an industrial hub and regional
trading zone.
• In terms of the third wave movement and Columbian coffee market, The present approach will need to change if Colombia is to prosper in the
single-origin market and if its coffee growers are to benefit from this industry shift. The FNC must adjust to focus on both volume and ultra-
high-end markets at the same time. This change will allow the FNC to keep its purchasing guarantee for the benefit of all Colombian
producers while also providing top-quality producers with a legal pathway to a higher-margin market.
Social
analysis:

7. Technological analysis:
• The technological factor is most visible in infrastructure development. It would be hard to travel between
countries without superior technologies. Alongside china itself, there are several other countries such japan who
are known for there advance technologies. Kiyoyuki Seguchi, director of the Canon Institute believes that
Japan has unique technologies which can contribute a lot and can prove to be highly valuable for the BRI
project. This will also improve their relations as both countries will be joining technological forces to make the
project successful.
• The expansion of the transportation network will assist West China in gaining timely and cost-effective access
to potential markets. The train's completion has proven these benefits, reducing the time to 14 days compared to
45 days by sea and lowering expenses compared to air freight, the region's primary delivery mode
(Ramachandran, 2016). The expansion of the connection network will allow Central Asian states access to the
European market as well as access to seaports in the south.
• Also, in terms of Columbia's tech enabled food deliver market, In Colombia, economic and technical trends
indicate that mobile app-based delivery services will be a successful model in the near and medium future. A
burgeoning middle class in Bogotá is willing to pay a higher price for convenience
• In terms of Intellectual Property Rights in China, some academic research confirms the existence of cultural
differences, a growing body of evidence suggests that attitudes about intellectual property and IPR regulations
in China are driven more by economic factors than by culture. China aspires to be a technology-driven
economy. It is becoming increasingly vital for the country to construct a robust intellectual property protection
system and establish itself as an IP powerhouse in order to attain this goal. There is widespread agreement that
China's innovation will be stunted unless IP protection is significantly improved.
Technological
analysis:

8. Environmental
analysis:
• Many of BRI’s major corridors are known to pass through ecologically sensitive areas. Increasing
interconnectivity in Eurasia through the initiative could mean dissecting these natural environments with
miles and miles of roads and rails, and such disruptions would threaten the plants and animals of the
surrounding ecosystems—as well as the livelihoods of the people who live there.
• According to a 2017 report published by the World Wildlife Fund (WWF),as many as 1,739 Important Bird
Areas and Key Biodiversity Areas at risk of harm were identified using data from international organizations.
• Over 265 threatened species could be adversely affected—including endangered tiger species and the
critically endangered saiga antelope.
• Increasing access to undeveloped areas of forest will increase the likelihood of poaching and deforestation in
those areas.
• One BRI project in Indonesia has drawn fierce condemnation and protests. A dam scheduled for construction
on the island of Sumatra poses serious threats to the orangutans and jungle of the highly diverse Batang
Toru ecosystem. The project is run by Sinohydro, China’s state-owned hydropower company, and includes
the blasting of a tunnel, construction of access roads, and flooding of a wide expanse of jungle.
• These types of projects also threaten the livelihoods of people who rely heavily on their local environmental
resources. A proposed dam along the Mekong River in Cambodia could cut off some species of fish from
their upriver breeding grounds, drastically reducing the yields of the river’s fisheries.

9. Legal
analysis:
• ‘Onerous’ concession terms: While it is common for sponsors to provide legal terms in their favor,
these rail concession agreements feature a range of lengthy tax concession periods, long term
leases for Chinese companies and imports, plus exemptions from foreign worker quotas that in
the longer terms are highly likely to raise issues about the competitiveness of existing domestic
industries.
• Debt burden: The BRI also raises the risk of debt distress–difficulty in maintaining repayment of
loans–in some borrower countries. Eight out of the 68 countries that have been identified as
potential BRI borrowers are at risk of debt distress based on the pipeline of project lending
associated with BRI.12 Looking at BRI funding arrangements, it appears as if the recipient countries
must bear the brunt of most of the financial risk whilst China benefits from both the financing and
construction of infrastructure projects.
• Eg: Laos: The 414km Laos railway project linking Vientiane to Boten (on the China-Laos border)
has exacerbated Laos’ already precarious debt levels, which reached 68% of GDP in 2016.
Concerns have been raised by the IMF that Laos, which lacks any railroads, is being led into a debt
trap.
• Indonesia: Launched in January 2016, the 142km US$6bn Jakarta-Bandung railway is behind
schedule. As of March 2018, only 10% of work has been completed. With only half of total land
secured, cost escalation has already resulted in the price of the project increasing from US$5.5bn
to US$6bn.

10. Thank you