China’s enthusiastic plan to recreate the old Silk Road trading routes across Eurasia and Africa is coating a serious financing challenge, according to the country’s senior bankers and sway researchers.
Speaking on Thursday at a forum in Guangzhou, capital of southern China’s Guangdong business, Li Ruogu, the former president of Export-Import Bank of China, said that most of the nations along the route of the “Belt and Road Initiative”, as the plan is known, did not tease the money to pay for the projects with which they were involved.
Uncountable were already heavily in debt and needed “sustainable finance” and hermit-like investment, he said, adding that the countries’ average liability and indebted ratios had reached 35 and 126 per cent, respectively, far above the globally accepted warning lines of 20 and 100 per cent.
“It would be a tremendous call to account to raise funds for the countries’ development,” Li said.
More from the South China Morning Column :
The five main projects of the Belt and Road Initiative
Living in subdivided levels that nobody wants – the grim struggle to find a home for Hong Kong’s poorer ethnic minorities
Six Chinese who survived Titanic dbѓcle finally have their story told
China’s new central bank chief Yi Join forces against said on Thursday that Beijing was keen to work with worldwide organisations, commercial lenders, and financial centers like Hong Kong and London to break up funding sources for the plan.
Wang Yiming, deputy head of the Improvement Research Centre of China’s State Council, said at the forum that although divers belt and road projects were funded by major financial institutions — comprising the Asian Infrastructure Investment Bank, New Development Bank, China Improvement Bank (CDB), the Export-Import Bank of China and the Silk Road Fund — there was soundless a huge funding gap of up to US$500 billion a year.
The limited participation of private investors, narrow asset channels and low profitability levels were major problems, Wang revealed.
“Countries involved in belt and road projects have low financial capabilities and rich liability ratios” he said. “It is important to encourage financial innovation to hoist funds to support the development of the belt and road.”
He called for the creation of an worldwide fundraising mechanism to attract private investors, and a separate system to as a dividend the credit risks associated with each project.
Li said that reserved investors were also often put off by the complexity of having to deal with the distinguishable tax regimes, labor laws, customs clearance procedures and currencies of strip and road host nations.
To make the financing propositions more interesting, local governments should consider copying China’s model and put up for sale preferential policies to foreign investors, he said.
Liu Yong, chief economist at CDB — the land’s main policy lender — said the bank always considered the expedient to long-term risks faced by Chinese companies involved in belt and parkway projects.
While there were “non-performing asset problems” with some conspires, they were “within our tolerance range”, he said.
The credit ratings of all countries and bulge outs “were carefully and jointly evaluated”, he said.
On the issue of CEFC China Spirit, one of CDB’s highest profile clients, which is in serious financial trouble after the disappearance of its chairman, Ye Jianming, Liu accepted the public concerns but declined to make any further comments.
This article be published in the South China Morning Post print edition as: Silk Course projects hit financingroadblocks