Experts call for better financial connectivity

Experts are calling for greater focus on the promotion of international financial connectivity by diversifying models of investment and funding, and enhancing the internationalization of the renminbi.

Such efforts would help fill the significant gap between financing and project aspirations related to the Belt and Road Initiative.

“To facilitate funding, domestic financial institutions should keep deepening cooperation with multilateral financial institutions, and develop innovative financial products to meet capital needs according to various projects,” said Frank Lyn, leader of mainland and Hong Kong markets at PwC, an international accounting firm.

Private capital is essential to fund this huge trading network, he said, noting the importance of the publicprivate partnership mode.

As for currency settlement, Lyn said the Belt and Road Initiative should be developed in coordination with the internationalization of renminbi.

He added that the increasing use of the renminbi across borders will offer capital support and convenient services for overseas projects, and also reduce the risk of exchange rate fluctuation.

He made the comments at the recent 2017 Boao Forum for Entrepreneurs, organized by China Economic Information Service and Xinhuanet.

The Asian Development Bank estimated that some of its members, mostly B&R-related economies, would need $22.6 trillion infrastructure investment by 2030, or $1.5 trillion annually. “No single source of funding can supply that much investment,” wrote Qu Hongbin, chief China economist of HSBC.

According to Lyn, there are several reasons for the funding shortage.

First, infrastructure is in strong

demand but has a long recovery cycle and low revenue rate.

Second, he said, underdeveloped financial systems and less open financial markets in some areas prevent capital from efficient involvement in large projects.

“Uncontrollable risk is the main reason why investors cannot offer capital or the cost of capital is high,” Lyn said.

To solve this problem, China is engaged in all-round financial diplomacy to deepen international financial cooperation.

Luo Yanjun, deputy director-general of financial department at National Development and Reform Commission, said: “For now, nine Chinese-funded banks have set up 62 branches in 26 countries, and China signed currency swap agreements with 22 B&R-related economies.”