China's star-studded Belt and Road summit ended on Monday, after speeches from global statesmen — and some serious policy pledges from Xi Jinping, the Chinese president.
The event, held in Beijing, was attended by a who’s who of global politicians including Vladmir Putin, Russia's president; Turkey's leader Recep Erdogan, and Rodrigo Duterte, the president of the Philippines. Christine Lagarde, head of the International Monetary Fund, and Jim Yong Kim, president of the World Bank, were also in attendance.
The event was designed to publicise the Belt and Road Initiative, still widely known by its previous name: One Belt, One Road (Obor). A key policy of Xi's administration, the initiative has already seen billions of dollars invested in infrastructure throughout emerging Asia. Xi used the summit as a chance to unveil his next steps — and he was not short on specifics.
He said China would increase its pledge to the state-run Silk Road Fund by Rmb100 billion ($14.5 billion), and promised the government would “encourage” financial institutions to provide offshore renminbi funding worth around Rmb300 billion.
China Development Bank and the Export-Import Bank of China, a pair of state-owned policy lenders, appear to have been given separate targets. They will set up ‘special lending schemes’ respectively worth Rmb250 billion and Rmb130 billion, according to Xi.
It remains to be seen how quickly these funding sources find their way to project managers, but the ambition of the plan should not be understated. By adding Rmb780 billion of funding to the mix, through a combination of public- and private-sector money, Xi has shown that his commitment to the project is as strong as ever.
In honour of the summit, FinanceAsia dug through its archives for some of our most interesting pieces on how the Belt and Road Initiative will effect Asia's infrastructure spending push. From an introduction to the key players in the sector to an examination of the major hurdles, the below articles are essential reading:
Hong Kong held its own summit on the Belt and Road plan last May, prompting FinanceAsia to consider how much progress had been made with the plan. The key then, as now, was that projects married geopolitical ambition with commercial sense. “Obor is not a Marshall Plan,” Standard Chartered’s Peter Burnett told us.
- The Asian Infrastructure Investment Bank is a crucial plank of China's latest 'go out' policy. It can provide a ready source of funds for ambitious infrastructure projects — and help counter-act the enormous power of the World Bank and the International Monetary Fund, two institutions dominated by the United States and Europe. But Ian Bremner, a political consultant, warned the bank's returns could be disappointing.
- The impact on the deal landscape should not be overlooked. The Belt and Road Initiative has led to some noteable deals, including Shanghai Electric Power’s acquisition of Pakistan’s K-Electric last October, and a multi-tranche 'Silk Road' bond from Bank of China. Bankers believe there is more to come.
Still, the policy has not been without its critics. Some Sri Lankan executives have complained about investment terms — and protests in the country have made clear that Chinese money is not universally being welcomed. Indian officials, meanwhile, were a noticeable absence from the summit.
- The importance of Belt and Road is clear when you ask investors their priorities. In a recent FinanceAsia poll, sponsored by HSBC and Standard & Poor’s, around 50% of bond investors polled said they planned to participate in the initiative. But as we have previously argued, neither bond markets nor Chinese funds like the AIIB should be relied on to fund Asia's massive infrastructure needs.