Lon­don fi­nanciers look­ing to­wards China


At 8:00 am ev­ery day, the Lon­don Stock Ex­change opens its trad­ing mar­ket with clus­tered real- time stock prices pro­jected across its cen­tral screen, and another busy day starts for the city's bankers, lawyers and traders.

For hun­dreds of years, this has been the fa­mil­iar pace of life in the City of Lon­don. But un­be­knownst to many, a sub­tle change has swept over Lon­don's cap­i­tal mar­kets as bankers and traders are in­creas­ingly look­ing east to con­nect with B&R op­por­tu­ni­ties, a trend ex­ac­er­bated by un­cer­tain­ties caused by Bri­tain's pend­ing de­par­ture from the EU.

"Coun­tries along the routes need to in­vest tril­lions of US dol­lars in de­vel­op­ing their in­fra­struc­ture in the years ahead. Fi­nanc­ing the Belt and Road is a huge en­deavor," said Ian Stu­art, CEO of HSBC UK.

HSBC es­ti­mates that B& R de­vel­op­ment projects will cost up to $6 tril­lion in the next 15 years, while Price­wa­ter­house- Coop­ers es­ti­mates the costs will be $5 tril­lion.

HSBC has al­ready fi­nanced nearly 100 projects in B& R economies. Mean­while, Stan­dard Char­tered funded more than 50 B&R deals in 2017, and last De­cem­ber it an­nounced an ad­di­tional $20 bil­lion com­mit­ment to B&R projects by 2020.

Es­sen­tially, what makes B&R in­fra­struc­ture projects at­trac­tive as fi­nanc­ing op­por­tu­ni­ties for Lon­don's big­gest banks is their at­trac­tive pro­jected re­turn, rel­a­tive to risks.

The high re­turn comes from sta­ble rev­enue streams to be gen­er­ated once th­ese in­fra­struc­ture projects come into op­er­a­tion?sup­ported by strong eco­nomic growth from coun­tries en­joy­ing the new in­fra­struc­ture.

The low risk, for pri­vate­sec­tor fi­nanciers, de­rives partly from ef­forts by gov­ern­ment and multi­na­tional de­vel­op­ment bank ve­hi­cles that con­trib­ute the first, and most risky dol­lars, to each project.

"The par­tic­i­pa­tion of highly cred­it­wor­thy mul­ti­lat­eral de­vel­op­ment banks and other pub­lic sec­tor in­vestors like them can def­i­nitely help to ' crowd in' pri­vate cap­i­tal," said Stu­art.

China is al­ready lead­ing the ini­tia­tive's fi­nanc­ing ef­forts. At the B&R fo­rum, China com­mit­ted an ad­di­tional $14.6 bil­lion to the Silk Road Fund, adding to its ini­tial $40 bil­lion in 2014.

The China- led Asian In­fra­struc­ture In­vest­ment Bank has ap­proved $2.8 bil­lion for 17 B& R projects. China De­vel­op­ment Bank had about $ 112 bil­lion of out­stand­ing loans and the Ex­port-Im­port Bank of China has ex­tended about $90 bil­lion of loans to such projects.

The Bri­tish gov­ern­ment has keenly sup­ported the B&R ini­tia­tive. "Lon­don is the nat­u­ral Western end to the Belt and Road," said Charles Bow­man, lord mayor of the City of Lon­don.

"In Lon­don we have the knowl­edge as well as highly liq­uid debt and equity cap­i­tal mar­kets, with a large global in­vestor base. This makes us an im­por­tant part­ner for China," said Bow­man.

Last year, the City of Lon­don led the cre­ation of a Green Belt and Road In­vestor Al­liance to en­cour­age fund­ing into en­vi­ron­men­tally friendly projects along the Belt and Road. This year, it will also co­host a B& R fo­rum in Lon­don.

For­mer prime min­is­ter David Cameron ac­cepted a lead role with a newly pro­posed 750 mil­lion pound ($ 1 bil­lion) China- UK fund, which gath­ers pri­vate- sec­tor fund­ing from both coun­tries to in­vest into B& R projects.

The fund was an­nounced as one of 72 out­comes from the 9th UK- China Eco­nomic and Fi­nan­cial Di­a­logue which took place in Bei­jing last De­cem­ber.

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