Financial industry needs to guard against risks when serving B&R, official

The Belt and Road (B&R) Initiative provides both opportunities and risks for China. Financial industry needs to make full use of financial cooperation to reduce risks when serving the B&R, noted Yang Zaiping, secretary-general of the Asia Financial Cooperation Association (AFCA) at a forum.

--- Four kinds of risks to alert under B&R

In the first seven months of 2017, China's exports to the countries along the B&R including Russia, India, Malaysia and Indonesia have increased by 28.6 percent, 24.2 percent, 20.9 percent and 13.9 percent year on year respectively.

Yang noted that the B&R construction calls for a large amount of investment. Investment in the infrastructure construction in the countries and regions along the B&R is estimated at 1.6 trillion U.S. dollars in 2016-2020.

However, risks always come with opportunities. Yang figured out four types of financial risks under the B&R, including country risks, credit risks, legal risks and cultural risks.

Yang tipped that enterprises must bear risk awareness in their mind as infrastructure construction projects always feature in long investment cycle, which may lead to many uncertainties. Some countries along the B&R have relatively high non-performing loan ratio. Moreover, Chinese financial institutions may face more complex situation in aspects such as law, policy, and payment and settlement.

--- Financial cooperation is an effective way to lower risks

Yang noted that financial cooperation is an effective way to lower risks. Promotion of financial cooperation would help reduce information asymmetry and inadequacy among relevant parties.

“On the one hand, Chinese financial institutions involved in the B&R construction should strengthen business cooperation and avoid cut-throat competition. On the other hand, they should blend themselves into the countries where they are located, cooperate with local governments and people,” suggested Yang.

Yang believes that cooperation at the government level is also important . The B&R construction has posed higher requirements for payment and settlement. At present, China has signed currency swap agreements with more than 20 countries and regions along the B&R. In the future, relevant sides will further strengthen cooperation in financial infrastructure, promote connectivity and enhance communication with regulators.