1The New Silk RoadHow Chinas New Silk Road Could Change the World and Put Money in Your Pocket

A report by Patrick Watson,Senior Editor, Mauldin Economics

The New Silk Road

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The New Silk Road

How Chinas New Silk Road Could Change the World and Put Money in Your Pocket

Once upon a time, someone from Europe first met someone from Asia. Scholars think this encounter took place at least 3,000 years ago.

While we dont know exactly when that fateful meeting occurred, we know where it came to pass: somewhere along the transcontinental pathway later dubbed the Silk Road.

Traffic grew quickly after that first collision as Western demand met Eastern supply.

Centuries of war, ever-changing borders, and better transportation combined to erase the worlds reliance on the Silk Road. Yet it never disappeared entirelyand today the worlds gaze has turned back to the Silk Road, once again eyeing its riches.

Read on and discover how in the next decade, Chinese President Xi Jinpings vision of a New Silk Road could upend the global economy. After three millennia, Europe and Asia are renewing their ancient trading partnerships and this time it will happen much, much faster.

To understand the New Silk Road, we first have to know the old one. Lets begin with a short walk down the well-trod path where East met West.

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The Original Silk Road

The Silk Road acquired its name from Chinas Han Dynasty, which began exporting fine silk to the West around 200 B.C. They built portions of the Great Wall of China to maintain and defend trade along the Silk Road.

Trade also flowed east and west by sea. A maritime version of the Silk Road extended from the South China Sea through the Strait of Malacca and along the coastline of modern-day India, Pakistan, Iran, and across to the Arabian Peninsula. From there, routes went north to Europe through the Red Sea and south to Somalia and Zanzibar.

Source: Wikimedia Commons

Few people traveled the Silk Roads full 4,000+-mile length by either land or sea, though their goods certainly did. Silk was the major Chinese export, while gold and silver flowed back from India, Persia, Arabia, Egypt, and Europe.

The road also carried cultural influences: religions, languages, inventions, and even diseases. Asias rich blend of civilizations would look much different today had traders not opened these lines of communication and commerce.

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Economically, the ancient Silk Road created a situation similar to today, in which China was an export powerhouse with relatively small imports.

This excerpt from a New York Times article paints a clear picture:

Ancient Rome, for example, found that it had little except glass that China wanted to buy. Pliny complained about the eastward flow of Roman gold along the Silk Road in exchange for Chinese silk.

Long-distance trade collapsed during the early years of the Dark Ages. But through the next several periods of rapid growth in international commercefrom A.D. 600 to 750, from 1000 to 1300 and from 1500 to 1800China again tended to run very large trade surpluses. By 1700, Europe was paying with silver for as much as four-fifths of Europes imports from China because China was interested in little that Europe manufactured.

Italian merchant Marco Polo popularized the Silk Road by journaling his 14th-century travels through Central Asia and China. Still in his teens, Polo left Venice with his father and uncle in 1271. They would not return until 1295, having traveled about 15,000 miles in 24 years.

Source: Wikimedia Commons

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War in Venice landed Marco Polo in prison soon after his return. He used the time wisely, dictating an account of his travels to his cellmate. The resulting book was the first comprehensive account of a European traveling to Asia.

Christopher Columbus read Marco Polos account and thought he could reach Asia by sailing west instead of east. Financed by Spain, he set sail in 1492, but he never found Asia because another continent stood in his way.

Just as geography changed Columbuss plans, today it dictates how a new Silk Road might change the global economy.

Chinese Geography

China is a huge country, but much of it is sparsely populated. Most of the population and economic output are concentrated in a small area that George Friedman, of the global-intelligence company Stratfor, calls Chinas island, also known as Han China. The rest of the country might as well be water.

Source: Stratfor

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Thick jungle separates Han China from Laos and Myanmar, the Himalayan Mountains stand between China and India, and huge deserts used to make journeys north to Russia and Siberia unappealing. Whats left is a much smaller, denser China than most Westerners imagine.

This heartland area is home to the ethnic Han Chinese, whose leader Kublai Khan welcomed Marco Polo centuries ago. Historically unfriendly territories surround Han China: Tibet and Xinjiang to the west, Inner Mongolia to the northwest, and Manchuria in the north.

While short of arable land, Han China receives abundant monsoon rains and contains several major rivers. Farmers and merchants used to dominate the region, and the surrounding areas were home to nomadic horsemen like the Mongols. Han Chinas history is mostly about efforts to control these areas.

That dynamic remains today as Beijing still struggles to maintain power outside the Han island zone. Free Tibet is still the goal for Tibetans and a danger to China. The Muslim Uighurs of northwestern China are equally restive.

The ancient Silk Road is the beeline route from Han China to Europe, but using it requires crossing Chinas restless west as well as a once unfriendly Russia. This, combined with lack of modern infrastructure in the region, means most of Chinas exports now must travel by sea.

Sea routes from Han China to Europe present another problem, though: the US Navy controls all of them. Natural chokepoints along the way make Chinese exports vulnerable to forces beyond Beijings control.

Chinas imports are vulnerable too, for similar reasons. In 2013, 82% of Chinas oil imports passed through the Strait of Malacca, along with 30% of its natural gas imports. Closing the route to China-bound tankers would be simple for the US Navy. Other US-friendly islands surrounding Chinas ocean access are Japan, Taiwan, and the Philippinesall staunch American allies.

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Source: Stratfor

Does Beijing fear a US blockade?

No, and chances that a US president would try to impose one are very low. Nevertheless, smart rulers always keep their options open. In the last decade, Chinese leaders realized that having a land route to Europe would bring numerous benefits.

One leader decided to make it happen.

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One Belt, One Road

Chinese President Xi Jinping took office in 2012. Over the next two years, he consolidated his position as perhaps Chinas most powerful ruler since Mao Zedong. Xi faces the same problem as Kublai Khan did centuries ago: a huge trade surplus with the west.

Internationally, Xi has displayed ever-increasing confidence, discarding Dengs advice for China to hide its brilliance and bide its time, declared a recent article in NewStatesman. For him, the time has come. The PRCs huge aid program includes the One Belt, One Road plan to pay for infrastructure, transport routes, and energy generation plants along the maritime passage from China to the Gulf, and also across central Asia to Russia and Germany beyond.

One Belt, One Road is the official name for Xis New Silk Road initiative. The label seems odd to Westerners because the plan is for neither one belt nor one roadit envisions a huge network spanning much of the Asian continent. It might be more accurate to think of the initiative as One Framework or One Plan.

Beijing-based Caixin Online describes the plan this way:

One belt, one road is a development strategy started by the Chinese government in 2013. It refers to the New Silk Road Economic Belt, which will link China with Europe through Central and Western Asia, and the 21st Century Maritime Silk Road, which will connect China with Southeast Asian countries, Africa and Europe. The two are collectively known as the Silk Road Initiatives.

Neither the belt nor the road follows any clear line geographically speaking; they serve more as a roadmap for how China wants to further integrate itself into the world economy and strengthen its influence in these regions. Many of the countries mentioned have traditionally had close trade and investment relations with China, which says they should deepen cooperation, especially in terms of building infrastructure and other development projects.

The strategy underlines the governments push to have a bigger say in global economic and political affairs, and to export Chinas technologies and production capacity in oversupplied areas such as steel manufacturing.

The last sentence is key: the Chinese government wants a bigger say in global economic and political affairs. In one sense, it already has a big say in both. It is now the worlds second-largest economy by some measures, trailing only the United States. Chinas huge energy and raw material demand lets it dictate terms to many countries wishing to supply it. No one doubts Chinas importance in the global economy.

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Still, Beijing and particularly Xi Jinping feel China deserves more respect. They want to build influence and respect around the globe, most of all with Chinas nearest neighbors. One Belt, One Road is part of that effort.

The Chinese government also seeks to export Chinas technologies and production capacity in oversupplied areas such as steel manufacturing. This clause is key to understanding Chinas goals.

What technology does China have that the rest of the world wants to buy? Yes, Apple iPhones come from China, but the design is American. Chinese factories excel at assembly, but until recently ran very short on originality.

Source: Mac Life

For Xi to take China where he wants, this has to change. At the same time, the assembly business will remain important, and homegrown companies like Xiaomi will improve their product quality.

China also needs to use its capacity in oversupplied areas such as steel manufacturing. The slowing economy and Beijings decision to emphasize growth in domestic consumption leaves the nation with excess industrial capacity. The Silk Road initiative will keep some of this infrastructure from going idle.

Xi views One Belt, One Road as contributing to several important goals. It will reduce the countrys geographic isolation, use excess infrastructure capacity, stimulate trade, use some excess dollar reserves, and enhance relations with neighboring countries. If the Chinese had an idiom equivalent to no-brainer, it would probably fit.

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Hauling New Treasure

With the coastal cities bursting at the seams, Chinas lowest labor costs are now inland in cities like Chongqing. Beijing would like to put those people to work, but doing so would aggravate another problem: shipping time.

As Chinese manufacturers move inland, getting their products to European markets has become more complicated, wrote The Economist. The journey back to the coast and halfway around the world by sea takes up to 60 daysan eternity for the latest iPads and other fast fashion products. Kazakhstan offers a backdoor route. Trains from Chongqing in south-west China to Duisburg in Germany, 10,800 kilometres (6,700 miles) via Kazakhstan, Russia, Belarus, and Poland, supposedly take just 14 days.

Source: China Daily

That 60-day shipping time is a huge problem in a world where technology and consumer trends can render products outdated in only 612 months. Reducing it to only 14 days would give China a huge boost.

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In fact, this is already happening on a limited scale. One American company started using the Silk Road in 2013heres an excerpt from a New York Times report:

Hewlett-Packard, the Silicon Valley electronics company, has pioneered the revival of a route famous in the West since the Roman Empire. For the last two years, the company has shipped laptops and accessories to stores in Europe with increasing frequency aboard express trains that cross Central Asia at a clip of 50 miles an hour. Initially an experiment run in summer months, H.P. is now dispatching trains on the nearly 7,000-mile route at least once a week, and up to three times a week when demand warrants. H.P. plans to ship by rail throughout the coming winter, having taken elaborate measures to protect the cargo from temperatures that can drop to 40 degrees below zero.

Though the route still accounts for just a small fraction of manufacturers overall shipments from China to Europe, other companies are starting to follow H.P.s example. Chinese authorities announced on Wednesday the first of six long freight trains this year from Zhengzhou, a manufacturing center in central China, to Hamburg, Germany, following much the same route across western China, Kazakhstan, Russia, Belarus and Poland as the H.P. trains. The authorities said they planned 50 trains on the route next year, hauling $1 billion worth of goods; the first train this month is carrying $1.5 million worth of tires, shoes, and clothes, while the trains are to bring back German electronics, construction machinery, vehicles, auto parts, and medical equipment.

DHL announced on June 20 that it had begun weekly express freight train service from Chengdu in western China across Kazakhstan and ultimately to Poland. Some of H.P.s rivals in the electronics industry are in various stages of starting to use the route for exports from China, freight executives said.

The One Belt, One Road initiative should speed up the process even further through both new infrastructure and streamlined customs clearance at each border crossing.

Another challenge is that railroad track widths change at several points along the way, forcing shippers to move the cargo off one train and onto another. New high-speed lines should solve this in time, though. Meanwhile, the participating countries will need to build sophisticated freight-handling facilities to keep traffic moving.

The New Silk Road may turn out to be one of the largest construction projects in human history. Companies involved in it stand to earn enormous revenue in the next decade.

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Mapping the New Silk Road

The Silk Road Initiative is more than a road. The plan includes an enormous network of highways, railroads, seaports, border crossings, oil and gas pipelines, shipping routes, and economic corridors. They span the width of the Eurasian landmass and extend north to Siberia and south to the tip of Africa. Over two billion people live in the areas touched by the Silk Road Initiative.

The plans exact parameters are still changing. For instance, China is in talks to bring India more fully into the plan. Currently India only has one link at its Kolkata port city. Lingering distrust over border disputes and particularly Chinas friendship with Pakistan stand in the way, but the commercial potential may outweigh them. Indias involvement would be a huge boost, and would add many more projects and routes to the list.

This Mercator Institute map is a good overview of where the Silk Road Initiative stood as of mid-2015.

(Click on the map for an enlarged view)

Source: Mercator Institute for China Studies

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Lets highlight some key parts of the network.

A railroad line will begin at Madrid, Spain, extending east through France, Germany, Poland, Belarus, and into Russia. There it will split into two forks.

The northern route will go across Russian Siberia and then through Mongolia to Beijing. An extension will go north into Manchuria as well.

The southern railroad will cross Kazakhstan and western China before entering the Han Island we discussed earlier. It will reach the cities of Xian, Zhengzhou, Chongqing and terminate at the Pacific port of Yiwu.

A network of oil and gas pipelines will crisscross central Asia, connecting energy-producing areas with Chinas energy-hungry heartland. Natural gas from the Caspian Sea and Arctic Russia will be able to reach western China. Other lines will deliver fuel from Siberia to Manchuria and new port facilities near Vladivostok. From there, tankers can transport oil to Japan, southern China or even across the Pacific to Latin America.

The Silk Road Initiative includes two Economic Corridors. These will be more concentrated infrastructure networks, designed to jumpstart growth in regions with untapped economic potential. Each corridor will include highway, pipeline, railroad, electricity, broadband, and port projects.

The China-Pakistan Economic Corridor (CPEC) will connect Kashgar in northwestern China with the Indian Ocean seaport of Gwadar, Pakistan. Spanning almost 1,900 miles of often-rugged terrain, the corridor will open a long-isolated part of China to commerce with the outside world. The two countries signed an agreement in April 2015 to spend $46 billion in new infrastructure for this corridor. Construction is already underway.

The Bangladesh-China-India-Myanmar (BCIM) economic corridor predates the Silk Road Initiative. A new rail line connecting Kunming, China with Indias Kolkata seaport will integrate the BCIM into the Silk Road network. Along the way, it will pass through the fabled Mandalay in Myanmar (formerly Burma) and Dhaka in Bangladesh.

An energy pipeline will cross Myanmar from coastal Myanmar to Nanning, China. This critical link bypasses those maritime choke points we mentioned earlier, including the Strait of Malacca. Also included will be a rail link from Chiang Khong, Thailand to Bangkok and all the way south to Singapore.

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Watch the Crossroads

As you can tell, the modern-day Silk Road will cover a lot of territory. Since you cant invest everywhere, keep an eye on the crossroad cities. Places where various strands of the Silk Road Initiative intersect could boom in the coming decades.

This table will help you get started.

Silk Road ConnectionsCountry City (Alternate

Spelling)Gas

PipelineOil

PipelineEconomic Corridor

Railroad Connections

Border Crossing

Seaport

China Kunming Yes Yes Yes

Chongqing (Chungking) Yes

Yiwu Yes

Kashgar (Kaxgar) Yes Yes

Urumqi Yes

Thailand Chiang Khong Yes Yes

Map Tu Phut (Rayong) Yes

Bangladesh Dhaka (Dacca) Yes Yes

Chittagong Yes

India Kolkata Yes Yes

Pakistan Gwadar Yes Yes

Islamabad Yes

Myanmar Mandalay Yes Yes Yes

Kyaukpyu Yes Yes Yes Yes

Sittwe Yes

Kazakhstan Almaty Yes

Aktau Yes

Khorgos Yes Yes

Atyrau Yes

Zhanaozen (Usan) Yes

Russia Tayshet (Taishet) Yes

Novosibirsk Yes Yes

Nachodka (Nakhodka) Yes

Vladivostok Yes Yes Yes

Mongolia Ulaanbaatar (Ulan Bator) Yes

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As you can see in the table, four cities will score triple plays from the Silk Road Initiative, with three different connection types. They are:

Kunming, China

Mandalay, Myanmar

Kyaukpyu, Myanmar

Vladivostok, Russia

These cities should become economic hotspots as the broader Silk Road comes together over the next decade. You can watch the news for stories about business development in and around them. If you are a world traveler, they might be interesting places to visit.

Our next table has more detail on the Silk Road cities, including the names of some public companies with operations there.

Country City (Alternate Spelling)

Population (Year) Major Industries Public Companies Operating in Region

China Kunming 3.9 million (2010) machinery, automobiles, electrical equipment, tobacco, metals, pharmaceuticals

Aluminum Corp of China Ltd (2600:HK), Kunming Yunnei Power Co Ltd (000903.SZ), KPC Pharmaceuticals Inc (600422.SS), Shenji Group Kunming Machine Tool Co Ltd (0300.HK)

Chongqing (Chungking)

7.0 million (2010) automobiles and motorcycles

Chongqing Changan Automobile Co Ltd (000625.SZ), Chongqing Iron & Steel Co Ltd (601005.SS), Chongqing Dima Industry Co Ltd (600565.SS), Chongqing Zongshen Power Machinery Co Ltd (001696.SZ)

Yiwu 1.5 million (2010) manufacturing for exports

Yiwu Huading Nylon Co Ltd. (601113.SS), Vanfund Urban Investment & Development Co Ltd. (000638.SZ), Lianhua Supermarket Holdings Co Ltd. (0980.HK)

Kashgar (Kaxgar) 4.0 million (2010) textiles N/A

Urumqi 3.5 million (2010) oil, metals, textiles, machinery, energy, chemicals, food processing

PetroChina Co Ltd. (601857.SS)

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Country City (Alternate Spelling)

Population (Year) Major Industries Public Companies Operating in Region

Thailand Chiang Khong 61,321 (2010) Textiles, import/export trade

N/A

Map Tu Phut (Rayong)

61,902 (2010) fishing, chemicals, automobiles

Rayong Wire Industries PCL (RWIm.BK), Capital Engineering Network PCL (CEN.BK)

Bangladesh Dhaka (Dacca) 17.1 million (2011) finance and insurance, telecom, textiles, cement and construction materials, leather, electronics

Dhaka Bank Ltd. (DHBK.DH), Dhaka Insurance Ltd. (DHAK.DH), Dhaka Electric Supply Company Ltd. (DESC.DH)

Chittagong 4.5 million (2011) Shipbuilding, textiles, exports

Jamuna Oil Company Ltd. (JOCL.CJ1), BSRM Steels Ltd. (BSRM.CJ1), Aramit Cement Ltd. (ARMC.CJ1), Western Marine Shipyard Ltd. (WEST.CJ1)

India Kolkata 15.9 million (2011) finance and banking, IT ABG Infralogistics Ltd. (ABG.BO), Emami Paper Mills Ltd. (EMAP.BO)

Pakistan Gwadar 43,850 (1998) fishing , import/export trade

N/A

Islamabad 3.8 million (2011) finance and banking, IT Ados Pakistan Ltd. (ADPK.KA), Pakistan Telecommunication Company Ltd. (PTCA.KA), Pak Datacom Ltd. (PDCL.KA)

Myanmar Mandalay 1.4 million (2014) agriculture, textiles, mining

N/A

Kyaukpyu 165,352 (2014) oil & gas, fishing N/A

Sittwe 147,899 (2014) import/export trade N/A

Kazakhstan Almaty 1.7 million (2015) finance and banking, media

Mezhdunarodnyi aeroport Almaty AO (ARAL.KZ), Coca-Cola Icecek AS (CCOLA.IS)

Aktau 182,394 (2015) import/export trade, machinery, leather, chemicals, plastics, metals, pharmaceuticals

ArcelorMittal SA (ISPA.AS)

Khorgos 85,000 (2014) import/export trade, food, leather, chemicals, machinery

N/A

Atyrau 204,013 (2015) oil & gas KazTransOil AO (KZTO.KZ)

Zhanaozen (Usan) 110,989 (2015) oil & gas KazTransOil AO (KZTO.KZ)

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Country City (Alternate Spelling)

Population (Year) Major Industries Public Companies Operating in Region

Russia Tayshet (Taishet) 33,836 (2014) oil & gas, metals Surgutneftegaz OAO (SNGS.MM), United Company RUSAL Plc. (RUAL.MM)

Novosibirsk 1.5 million (2014) metals, electricity, oil & gas, food products

Novosibirskiy zhirovoy kombinat OAO (NZKKI.RTS), Novosibirskenergo OAO (NVNG.MM), Khanty-Mansiyskiy Bank Otkrytiye PAO (HMBO.MM)

Nachodka (Nakhodka)

157,397 (2014) import/export trade, fishing, oil & gas

Nakhodkinskiy morskoy rybnyi port OAO (NARPI.RTS), Nakhodkinskaya baza aktivnogo morskogo rybolovstva OAO (NBAMI.RTS), NK Rosneft' OAO (ROSN.MM)

Vladivostok 630,027 (2014) import/export trade, fishing

Vladivostokskiy morskoy torgovyi port OAO (VMTPI.RTS), Gazprom PAO (GAZP.MM)

Mongolia Ulaanbaatar (Ulan Bator)

1.3 million (2010) mining, oil & gas, finance and banking, food, chemicals, metals, automobiles, machinery

Ulaanbaatar Khivs Jsc (UBH.MNE), Areva SA (AREVA.PA)

The Silk Road at Sea

Remember Marco Polo? Much of his journey was afloat instead of across land. Thats true for the new Silk Road, too. China is building and/or financing new port facilities all around its own coastline, throughout South Asia and the Middle East, and even both sides of Africa.

The new ports are strategically located to open up trade between China, its suppliers, and its customers. They arent just random. Each port development is part of a larger plan to ship raw materials to China and/or manufactured goods from China.

Building a seaport is more complicated than many people think. First, you need a coastline with relatively calm waters deep enough to accommodate todays huge cargo ships. Then you need facilities to load and unload shipping containers, crude oil, liquefied natural gas or bulk commodities.

Then, of course, the port isnt very useful unless it also has surface transportation to the inland areas where shipments need to go. That means railroads and highways. Building those requires massive amounts of fuel, steel, concrete, and labor. The laborers need food to eat and places to sleep.

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You can tell that just one seaport is a massive undertaking. China intends to build or upgrade dozens of them! You can see them in blue on the Mercator map. We already mentioned some of the Asian projects, but they will extend to Africa as well.

Mombasa, Kenya is already a major port city. China will expand it and help construct a railroad inland to Nairobi with branches going on to Uganda and Rwanda. Uganda, incidentally, is an oil exploration hotspot, so the railroad might expand to include a pipeline at some point.

A little further south, Dar es Salaam, Tanzania will get expanded port facilities. It will also be the eastern end of a new transcontinental railroad extending all the way to Lobito, Angola.

China has plans for Africas west coast, too. New ports for Nigeria and its neighbors will open up access to the regions oil reserves and other natural resources. A planned railroad will go from Lagos, Nigeria to Calabar, Cameroon.

Silk Road Opportunities

The sheer vastness of Xis vision begs the question of how to pay for it. China has been working on that part too. The first move was last years announcement that China would launch an Asian International Infrastructure Bank (AIIB). Similar to the World Bank, the AIIB will make loans and loan guarantees for projects throughout Asia.

The United States opposed AIIB and urged its allies not to join, but money talks, so most ignored the Obama administrations pleas. Xi will need foreign help to realize his vision, but he will award projects only to companies from China-friendly countries. Practically every US ally, except Japan and Canada, agreed to join the AIIB.

China will also pump capital into three other homegrown lending institutions: the China Development Bank, the Export-Import Bank of China, and the Agricultural Development Bank of China. As with the AIIB, the United States will have little influence on them.

Five Stocks to Watch

Since the new Silk Road is a Chinese idea, much of the development money will go to Chinese companies. Theyll get more favorable loan terms and other advantages. Most US investors arent able to buy Chinese stocks directly, but you still have opportunities. Here are five Chinese infrastructure firms with US listings.

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1. China Shipping Development Company Limited (CSDXY)

China Shipping Development Company Limited is a shipping company in the Peoples Republic of China and internationally. The company moves energy resources such as oil and coal; iron ore; and other dry bulk goods, such as metal and non-metallic ore, steel, cement, timber, grains, and fertilizers, as well as LNG. These will be critical resources for the buildout of the new Silk Road, and shipping companies will continue to benefit after the expansion of seaports on the route.

2. China Shipping Container Lines Company Limited (CITAY)

China Shipping Container Lines Company Limited owns and operates container ships and operates container terminals. The company is also heavily involved with shipping logistics. Demand for these services will grow as the new trade route increases port activity.

3. China Railway Group Limited (CRWOY)

China Railway Group Limited is a construction company in China. It has four divisions: The Infrastructure Construction focuses on railways, roads, ports, and airports. The Survey, Design and Consulting Services segment specializes in railway electrification, bridge, tunnel, and machinery design. The Engineering Equipment and Component Manufacturing segment designs and manufactures railway related equipment and materials, steel structures, and engineering machinery. The Property Development segment develops, sells, and manages real estate properties. All of these businesses will play an integral part in developing the overland transport to Chinas trading partners.

4. China Railway Construction Corporation Limited (CWYCY)

China Railway Construction Corporation is a subsidiary of China Railway Group Limited that designs and develops railways, highways, and airports. It also offers specialized railway machinery.

5. Sany Heavy Equipment International Holdings Co.,Ltd.(SNYYF)

Sany Heavy Equipment International Holdings Company Limited, manufactures and sells mining equipment and container handling machinery in Mainland China. Many of these products are exported, primarily to Ukraine, Russia, Australia, the Philippines, Indonesia, and Laos. Container handling machinery is essential to the expansion of seaports and stockyards, and this new project will drive heavy demand for this type of machinery.

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Other Stocks and ETFs

Top materials, engineering, and construction firms from the UK, Germany, France, Australia, and Russia will also participate in Silk Road projects, either directly or indirectly. Some names to watch:

BHP Billiton (BHP)

Rio Tinto (RIO)

Siemens (SIEGY)

Macquarie (MIC)

Hutchison Port (HCTPF)

The number of companies worldwide that can take on big infrastructure projects is limited. If the China-friendly ones devote their time, energy, and manpower to Silk Road facilities, US companies will have less competition when bidding for other projects. We could see a smaller-scale repeat of the infrastructure boom China launched in the mid-2000s.

Exchange-traded funds (ETFs) are a quick, simple way to play such a boom. Some top names to consider include:

iShares Global Infrastructure ETF (IGF)

iShares Emerging Markets Infrastructure ETF (EMIF)

ProShares DJ Brookfield Global Infrastructure ETF (TOLZ)

SPDR S&P Global Infrastructure ETF (GII)

Global X China Industrials (CHII)

Global X China Materials (CHIM)

Global X China Energy (CHIE)

Global X Central Asia & Mongolia (AZIA)

Some of these ETFs are small and relatively illiquid, at least for now. Before you make any trades, its a good idea to check the volume and make sure you dont swamp the days activity. Limit orders are a good idea on both buy and sell sides.

Combine the physical New Silk Road with the growing domestic demand for modern goods and products in China, and the rising importance of the yuan in worldwide tradeand you have a burgeoning economic force to reckon with for the rest of this decade and beyond. In other words, China is up and coming in a big way that no serious investor can afford to ignore.

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