Banks raise billions for B& R deals

Big Four seek funding both at home and abroad

China’s largest State- owned commercial banks are raising tens of billions of dollars to fund projects in countries along the route of the Belt and Road initiative ( B& R), according to people familiar with the matter, bolstering China’s ambitious plan as private capital pulls back.

The people said China Construction Bank Corp ( CCB), the country’s second- biggest bank by assets, was raising at least 100 billion yuan ($ 15 billion) for a fund to specifically finance B& R investment.

The people added CCB was raising cash onshore and offshore, and has already been running roadshows with investors.

Bank of China ( BOC), another major State bank, aims to raise around 20 billion yuan for a similar fund, according to two of the people.

The cash, raised via banks’ private equity or other investment platforms, is part of a broader push sponsored by the People’s Bank of China ( PBC), the country’s central bank, to use onshore yuan capital for offshore investments, including B& R projects, according to one of the people.

The other two of China’s “big four” banks – Industrial and Commercial Bank of China and Agricultural Bank of China – are mulling similar fundraising plans, two of the people said.

The people could not be named as they are not authorized to speak to the media.

The four banks and the PBC did not immediately respond to Reuters’ requests for comment.

During an international forum for B& R cooperation in Beijing in May, China pledged a $ 124 billion funding boost to help the B& R initiative build a modern Silk Road, connecting China with new and old trading partners. The plan included encouraging financial institutions to expand their overseas yuan fund businesses to the tune of 300 billion yuan.

China is trying to contain overseas deals after some extravagant purchases in recent years, but while private spending on deals has slumped, acquisitions by Chinese companies in countries that are part of the B& R initiative are soaring, totaling $ 33 billion as of mid- August.

That compares with a $ 31 billion tally for all of 2016, according to Thomson Reuters data. And official data showed that Chinese firms’ overseas investment was down 44.3 percent in the first seven months of 2017.

The people said CCB and BOC would raise US dollars for the offshore portion of their funds and yuan from onshore investors. Some of the onshore capital could be used offshore for Belt and Road deals overseas, two of the people said.