Promising Belt and Road Financial Cooperation Prospects

Financing is an important part of Belt and Road construction. In the process of propulsion of Belt and Road initiative, trade connection and supply chain channels is a prominent factor of strengthening economic and trade ties between related countries and China. Six economic corridors including China-Mongolia-Russia corridor, New Asia-Europe Continental Bridge, China-Central Asia-West Asia corridor and China-Pakistan corridor, not only make economic cooperation between China and related countries closer, and have also opened up trade and investment channels between China and South Asia, Central Asia and Europe. Belt and Road cooperation between China and related countries has made China expand channels through which it acquires industrial raw materials from Central Asia and South Asia, and boosted fusion of trade markets, meanwhile, promoting industry upgrading and development of industrial manufacturing of the related countries.

 

Data shows that investment potential on infrastructure projects in Belt and Road related countries is somewhere between 4 trillion and 8 trillion dollars, so much so that any single country can’t undertake such large scale of investment on its own. The investment of Chinese capital has leveraged this huge market. As the driving forces of Belt and Road initiative on the regional economy take effect, the market potential of related countries will be further released, which will attract more and more capital from other countries’ governments, foreign banks and private enterprises, so that the overall investment risks are scattered due to diversified capital sources.

 

As Jin Yan, Chief Economist of ICBC Standard Bank (London), said apart from direct and indirect investment from governments and enterprises, if guided under mature conditions, the capital markets of related countries can also play a positive role in the financing of Belt and Road projects, providing liquidity support for the projects. In addition, the positioning of developing financial products specially for Belt and Road projects will provide new motivation for international investors to hold Belt and Road project assets. In particular, the issuance of risk hedging derivatives can provide hedging tools for avoiding risks brought about by exchange rate and economic fluctuations etc. In the future, the green bond market will also attract more attention from international investors.

 

Green financial cooperation between China and Britain is a successful case in this respect. With the participation of the City of London, on April 25, 27 enterprises in the world signed Belt and Road’s green financial guidance framework in Beijing. Belt and Road related countries cover 55% of global carbon emissions. The City of London will continue to support the issuance of "green bonds" to help relevant countries save energy and reduce emissions, upgrade the level of environmental protection and sustainable development of infrastructure construction, control carbon emissions and help the "Green Silk Road".

 

In the future, the Belt and Road construction will be more open and the degree of marketization will be further enhanced. At the same time, the fields of Belt and Road project cooperation will be further expanded. Apart from traditional transportation, energy and other infrastructure areas, e-commerce and digital trade are expected to become new growth points of Belt and Road cooperation. In these respects, the advantages of China's Internet enterprises will be further shown. With the continuous expansion of Belt and Road cooperation areas, cooperation at the enterprise level and private capital participation will also be more and more extensive, so as to enhance the market activity of the Belt and Road related countries, which at the same time will further enhance the openness of the Chinese market.