A large proportion of investment activities associated with the Belt and Road Initiative have been spearheaded by the private sector, and the trend will continue, said a top former central bank official.
Zhou Xiaochuan, president of the China Society for Finance and Banking and the former governor of the People’s Bank of China, the central bank, said during the recent CIC Forum 2018 that non-governmental capital accounted for the bulk of funding for BRI-related projects.
“Most of the future opportunities for the BRI will come from non-governmental business cooperation, and we must take business sustainability into consideration when seeking funding for BRI projects,” said Zhou.
In respect of debt financing for BRI projects, commercial financial institutions offered more than half of the funding. As for development finance institutions and policy banks, they provided financing for the projects at the market transaction cost, rather than a low, public finance cost. Government capital only contributed a small part of the total funding, according to Zhou.
“While implementing BRI-related infrastructure construction projects, it is very important to set a target for a reasonable rate of return and introduce management approaches which adopt market principles to improve the return on investment by charging the users.
“We will also strengthen international cooperation and innovate the measures for international financing of BRI projects,” he said.
Zhou made the remarks at the forum held by China Investment Corporation in Beijing recently. The theme of the forum this year was “international industrial cooperation and bilateral cross-border investment,” an innovative approach to implement strategies for foreign investment in line with China’s needs for further opening up, said Tu Guangshao, vice-chairman and president of CIC.
“Economic globalization is an irreversible trend, despite the recent challenges and setbacks. Therefore, promoting global economic, trading and investment cooperation is a common responsibility for all of us,” Tu said.
The purpose of the forum, according to him, was to build a platform to bridge cross-border bilateral investment, create a cross-border investment ecosystem, promote international industrial cooperation, and build a cooperation platform for Chinese enterprises to go out and bring in overseas capital.
As China’s sovereign wealth fund, CIC has adhered to the philosophy of win-win cooperation as a responsible, long-term investor, he said.
During the first China-Japan Third-Party Market Cooperation Forum on Oct 26, CIC and five Japanese financial institutions jointly signed a Memorandum of Understanding for Strategic Cooperation to establish a China-Japan industrial cooperation fund.
CIC is also preparing for the establishment of other bilateral funds, with the aim of achieving win-win cooperation with the principles of co-sponsorship, joint management, complementarity and commercial viability, he said.
During a panel discussion about the establishment of a cross-border investment ecosystem at the forum, Jiao Zhen, CEO and founding partner of CDH Investments, said one of the most important ways for companies to grow their business is mergers and acquisitions.
“For a company to become internationally competitive, the question is not whether or not to expand its business overseas through M & As, but when to make the move,” said Jiao.