China’s big 4 banks raise funds for OBOR

China aims to its save forex kitty with scrutiny of outgoing funds

Hong Kong, Aug. 22: China’s largest stateowned commercial banks are raising billions to fund investment under Beijing’s “Belt and Road” drive, people close to the matter said, bolstering ambitions to revive Silk Road trade routes and internationalize the yuan.

China Construction Bank, the country’s second-biggest bank by assets, has been conducting roadshows to raise at least 100 billion yuan ($15 billion) from onshore and offshore investors, the people said.

Bank of China, the smallest of the country’s “big four” lenders, aims to raise around 20 billion yuan, two of the people said.

The fundraising comes less than a week after the government said it would strengthen regulation to reduce risk for domestic firms investing abroad and curb “irrational” Belt and Road investment.

The government is increasingly scrutinising international investment after some big-money deals in recent years.

Private spending on overseas mergers and acquisitions has since slumped in countries other than those targeted by the Belt and Road initiative, where investment for 2017 hit $33 billion this month.

That compared with $31 billion for all of 2016, Thomson Reuters data showed.

CCB and BOC are raising money via their private equity or other investment platforms, as part of a broader central bank push to invest yuan overseas, one of the people said.

Funds from offshore investors would be in US dollars, the people said.

Top lender Industrial and Commercial Bank of China and third-ranked Agricultural Bank of China are also considering raising Belt and Road funds, two of the people said.

The people were not authorised to speak with media on the matter and so declined to be identified.

The four lenders and the People’s Bank of China did not respond to requests for comment.

The fundraising follows government calls on financial institutions to develop overseas lending businesses, targeting a combined 300 billion yuan, to help connect China with old and new trading partners under an initiative modelled on the Silk Road, which stretched from Asia to Europe for almost two millennia.

Raising yuan for overseas investment would also increase the currency’s use in global trade and further its internationalisation, thereby reducing exchange-rate risk and preserving China’s forex kitty.

YUAN VALUE Because those Belt and Road countries have close economic and trade ties with China, after they receive our yuan funds, they can use renminbi to pay for Chinese goods, equipment and labour — Banker