Chinese lenders look to reap rewards from B&R financing opportunities

BEIJING — Chinese banks are looking to tap the opportunities arising from the huge investment and financing demands in the Belt and Road (B&R) regions, where investors are attracted by the potential of infrastructure and less-developed industries.

“Most countries along the B&R are developing economies that have numerous opportunities in infrastructure, railway transit, urban development, logistics, crossborder e-commerce and other areas,” said Hong Qi, chairperson of China Minsheng Bank, a leading joint-stock commercial bank.

Infrastructure financing demand alone will amount to $10 trillion years, Hong forum.

Betting on these prospects, the Beijing-based lender has signed lending agreements worth over $10 billion with businesses from more than 30 countries and regions, with more projects financed via public-private partnership in the pipeline.

Minsheng is not the only bank that has strengthened its push in the B&R. Other lenders including the Industrial and Commercial Bank of China and China Everbright Bank have also jumped into action. By the end of 2016, nine Chinese banks had set up 62 branches in 26 countries and in the next five said at a recent regions along the Belt and Road, data from the China Banking Regulatory Commission showed.

“There are bright prospects for banks to finance the B&R,” former Chinese Vice-Foreign Minister He Yafei has said.

Proposed by China in 2013, the B&R Initiative aims to build trade and infrastructure networks connecting Asia with Europe and Africa based on ancient land and maritime trade routes. Analysts believe opportunities are sprouting for global businesses to increase their presence and investment in the to-be-booming regions where public facilities still lag behind.

Multilateral lender the Infrastructure Investment Bank and the Silk Road Fund were founded to finance the B&R. Backed by financial support, investment went up steadily along the B&R. During the first 10 months of 2017, Chinese investors put forward $11.2 billion in 53 countries and regions involved in the Belt and Road Initiative.

Thanks to the capital pumped in, Asian infrastructure is improving rapidly, with transportation networks improved and more public facilities erected, ranging from power stations to hospitals.

“More tangible progress will have been made by 2020,” said Zhang Yansheng, a researcher at the China Center for International Economic Exchanges, citing railroads and expressways that will stretch to more areas including Southeast Asia and the Mediterranean.

“Investment growth in the B&R will pick up pace in a couple of years, with double-digit compound increase expected in 2018 and 2019,” said Robin Xing, Morgan Stanley’s China economist.

Not only will infrastructure improve, but global trade will also benefit, Xing said. “B&R countries will see a 10-percent increase in their exports in ten years because of Chinese investment as better ports and railways will facilitate cargo flows.”

While B&R construction is in full swing, concerns about investment risks also linger mainly due to regional political and economic instability.

Risks facing Chinese stateowned enterprises (SOEs), major investors in the B&R regions, are completely controllable, Xiao Yaqing, head of the State-owned Assets Supervision and Administration chief Commission (SASAC), said.

Over the last three years, 47 Chinese SOEs supervised by the SASAC have taken part in 1,676 projects in countries and regions along the B&R spanning energy, infrastructure and industrial cooperation. The investment was wellplanned and organized, and supervision of the decisionmaking process has been toughened, Xiao said.

Xing said the risks will be low. “Even if investment amounted to $60 billion a year ... it still only accounts for less than a third of China’s current account surplus and around 0.5 percent of the nominal GDP.”

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