Central bank official says lenders can expect returns
China’s Silk Road Fund has an important role to play while at an early stage of the Belt and Road Initiative’s implementation because it helps leverage additional funding from various sources, according to a vice-governor of China’s central bank.
“There is a huge funding gap to be filled in key projects, such as infrastructure construction, in countries and regions involved in the Belt and Road Initiative,” said Yi Gang, vice-governor of the People’s Bank of China. “It is necessary and timely to inject more money into the Silk Road Fund to leverage more funding sources to close the gap.”
Although there is no exact estimate for the total demand of infrastructure construction in economies participating in the initiative, the demand in Asia alone is estimated at $26 trillion by 2030, according to the Asian Development Bank.
The capital boost will not alter the market-based principles; it still will seek fair returns on its investment, Yi told Xinhua on May 14 regarding the government’s latest step to provide additional financial support to the Silk Road Fund.
President Xi Jinping said on May 14 that a total of 100 billion yuan ($14.49 billion) will be added to the fund as part of efforts to increase financial support for the initiative.
By the end of the first quarter this year, the fund has signed 15 projects, with a commitment to invest a total of $6 billion, according to data from the fund.
Leslie Maasdorp, vice-president of the New Development Bank, said compared with private investors, State-owned banks and multilateral banks have advantages to ensure financial sustainability of infrastructure projects.
He said private investors might not be interested in long-term infrastructure projects with a long return period, but those projects will attract private investors’ attention.
To better appeal to private investors, financial institutions can issue bonds in local currencies, because it improves efficiency and fends off risks of currency fluctuation, according to Maasdorp.
“We became interested in issuing bonds in local currencies not very long ago,” he said. “We are interested in exploring more possibilities in this field and to support the initiative.”
Feng Xiaohua, vice-president of Jin Lianan International Investment Group, said steps taken by large financial institutions are expected to attract more private investors in the future just like his company.
“They help inject some confidence to countries we know little about,” he said. “But before we make decisions, we need to wait after more detailed plans and preferential policies come out.”
The fund was set up in 2014 by policy banks and investment companies.