PBOC pushes yuan clearing services along Belt and Road

Bilateral, multilateral financial platforms will help facilitate trade and investment

The central bank will continue to make more bilateral currency swap deals, and enlarge the scope and scale of renminbi settlements with countries along the Belt and Road Initiative to cut exchange rate risk and transaction cost for trade and investment, said a senior central bank official on Wednesday.

Chen Yulu, deputy governor of the People’s Bank of China, said China will use both bilateral and multilateral financial cooperation platforms and more flexible financial service policies to further facilitate trade and investment along these two trading routes.

The actual payment amount between China and countries and regions along the Belt and Road Initiative amounted to 860 billion yuan ($129 billion) between January and August this year.

The People’s Bank of China has so far signed 21 bilateral currency swap agreements with central banks along the Belt and Road Initiative, with a total scale of 1.4 trillion yuan.

Six countries along the routes have been authorized as renm i n b i qualified fore ign institutional investors, with a total quota of 330 billion yuan, by the Pe o p l e ’s BankofChina. China has also established five renminbi clearing banks along these two trading routes.

The infrastructure, service and trade network proposed by China in 2013 envisions a Silk Road Economic Belt and a 21st Century Maritime Silk Road, covering about 4.4 billion people in more than 60 countries and regions in Asia, Europe and Africa.

“The establishment of a sound green financing mechanism will be a systemic project that requires coordination among central authorities, local governments, financial institutions and enterprises,” said Chen at the Silk Road Financial Forum, a part of the Fifth China-Eurasia Expo held in Urumqi, the capital city of the Xinjiang Uygur autonomous region.

Because many infrastructure projects that are being built or will be built in markets along the Belt and Road Initiative require a large amount of capital and need to wait a long time to gain financial returns, Chen said it is also important to develop transportation, environmental protection, public service and infrastructure through the public-private partnership model.

In the PPP, a government service or private business venture is funded and operated through a partnership of government and one or more companies from the private sector.

Ji Yuhua, deputy director of policy research department at the China Insurance Regulatory Commission, said insurance companies and regulatory authorities are keen to offer more financial support for medium and long-term projects in countries along the Belt and Road Initiative, as capital needed by life insurance companies has an economic cycle between 30 and 40 years.

Eager to gain more financial return from overseas markets, Chinese insurance companies have also established an investment fund with capital of 300 billion yuan in 2015, and a considerable part of the fund have been invested in infrastructure and services along the Belt and Road.

Chen Yulu, deputy governor of the People's Bank of China