Financial Services Focus Group Quarterly Update – Q4 2018

Published on 2018-11-26

Building an Investment and Financing System for the Belt and Road Initiative - by City of London

This report is jointly produced by the People’s bank of China and the city of London corporation. The City of London Corporation is the governing body of the Square Mile dedicated to a vibrant and thriving City, supporting a diverse and sustainable London within a globally-successful UK.

The Belt and Road Initiative (BRI) is internationally recognised for its principles of conegotiation, co-building and co-sharing. The BRI drew inspiration from the concept of Silk Road Economic Belt and the 21st-century Maritime Silk Road which is a development strategy adopted by the Chinese government in 2013. 

Financial support is critical to the implementation of the BRI. The countries along the BRI are mostly developing countries whose key projects, including infrastructure projects, are plagued by issues such as a lack of construction capability and funding. Therefore, these countries have greater demands for mid to long-term financing. The international finance community has previously offered concessional financing, including preferential loans, to these countries, which inevitably required financial subsidies and governmental support. This translated into greater limitations and a lack of sustainability, which would hardly satisfy the demands of the construction projects as part of the BRI, as these projects require substantial funds over a long period of time. It is therefore necessary to mobilise countries along the BRI to build a BRI investment and financing system that is market-oriented, sustainable and mutually beneficial. This paper will explore in detail the rationale for a BRI investment and financing system to comprise the following five features in order to expedite the building of a network of financial institutions and services:

  1. Longer investment period;
  2. The establishment of a reasonable cost of funds;
  3. The use of development financing as a driver to attract in commercial financing over time;
  4. The encouragement of local currencies to play an active role and;
  5. The stimulation of international collaboration in investment and financing

1

Please click here to download the full report.