Financial cooperation serves Belt and Road construction

The infrastructure projects related to the Belt and Road Initiative lead to strong demands for cross-border financial services and create great business opportunities for the banking industry, the Economic Daily reports.

In this context, China’s banking industry has increased its support for the Belt and Road Initiative. A financial cooperative network, which is based on the Silk Road Fund and commercial banks, is taking shape to bring tangible benefits to countries along the routes of the initiative.

Meanwhile, the internationalization of China's currency, the renminbi, and the two-way openness of the financial sector provide guarantees for the currency flow along the Belt and Road.

For example, by the end of 2016, the National Development Bank of China had funded more than 600 projects in countries along the routes in infrastructure, capacity cooperation and financial cooperation, with loans issued exceeding US$110 billion.

In 2016, the Export-Import Bank of China supported 603 Belt and Road projects in international capacity cooperation and equipment manufacturing, and the bank’s loan balance increased 13 percent year-on-year. 

The Silk Road Fund, founded in December 2014, has supported launching of a series of key projects. By the end of 2016, the fund had invested a total of about US$4 billion.

Experts suggest China accelerate the construction of international financial centers along the routes and further expand the scale of the renminbi’s international settlement to better serve building of the initiative. Expanding the renminbi’s use can help enterprises avoid exchange rate risks caused by the US dollar’s fluctuation.

The People’s Bank of China has signed bilateral currency swap agreements with the central banks of more than 21 countries along the routes, with a total scale of more than 1 trillion yuan, and set up renminbi settlement banks in seven countries.

In 2016, China further opened up its interbank bond market and foreign exchange market to facilitate investment from foreign agencies, optimized the policies on the Shanghai-Hong Kong Stock Connect, initiated Shenzhen-Hong Kong Stock Connect pilot reform, and further lifted restrictions on foreign investors.