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Facilitate the Belt and Road through Policy-based Finance

Submit Time:01-09-2017 | Zoom In | Zoom Out

Author:Hu Xiaolian | Source:People’s Daily July 26, 2017

Abstract:

The General Secretary Xi Jinping put forward the “Belt and Road” initiative in the fall of 2013, receiving strong responses both at home and abroad. Over the 4 years, the “Belt and Road” has obtained fruitful results, and provided wise Chinese solution for fostering new growth points for world economic development and facilitating global governance structural reform. In May this year, the General Secretary Xi Jinping made a comprehensive, systematic and profound explanation on the “Belt and Road” initiative to the international community during the “Belt and Road” Forum for International Cooperation, indicating the direction for deeply promoting the building of the "Belt and Road”.  

Have a deep understanding of the connotation of the Silk Road spirit 

As a link of friendly exchanges between China and foreign countries, the Silk Road is of special significance. The General Secretary Xi Jinping pointed out that the core of the spirit of Silk Road is “peace and cooperation, openness and inclusiveness, mutual learning and mutual benefit”. These are China’s ideas, China’s wisdom and China's contribution in coping with global challenges and overcoming development difficulties which respond to the trend of the times.  

In terms of peace and cooperation, the Silk Road shows treasures, precious vessels, science and technology, rather than sharp weapons, and brings spices and specialties, instead of killing and robbing, into China. Envoys on the Silk Road are those of peace and friendship, rather than aggressors. The spirit of Silk Road is peace and cooperation, which aims to settle disputes and promote exchanges and cooperation through dialogues, communication and consultation, and form the community of common destiny, community of common interests and community of common responsibilities while coping with challenges. Promote development with cooperation, promote peace with development, guarantee development with peace and drive development with cooperation.  

In terms of openness and inclusiveness, the “Belt and Road” has 4 features: 1. Open and inclusive cooperation ideas. Share benefits through mutual consultation and joint collaboration, work together and draw on each other's experience; 2. Open and inclusive cooperation space. Not only cooperate with major countries and regions, but also embrace the participation of other countries; 3. Open and inclusive cooperation fields. Focus on a five-pronged approach, i.e. policy coordination, facilities connectivity, unimpeded trade, financial integration and people-to-people bond, ranging from the government to enterprises and then to civil society, and from goods to funds and then to infrastructure; 4. Open and inclusive cooperation platforms. Include bilateral cooperation, multilateral cooperation and international organization cooperation. The UN General Assembly has incorporated the “Belt and Road” initiative into the resolution which has received extensive recognition of more than 190 countries.  

In terms of mutual learning, all human civilizations are essence and co-exist in the world. There is no judgment of good or bad. If a country believes that its civilization is superior to others’ and attempts to replace them, it will lead to conflict and confrontation. In history, the Silk Road transferred various cultures and introduced different civilizations. It is exactly the ideas, knowledge, goods and technical exchanges that have promoted social progress and improvement of people’s living standards.  

In terms of mutual benefit, China has seen rapid development of economy and significant increase of power since its reform and opening-up, and has had great appeal for countries in the world. Since the day when the “Belt and Road” initiative started to be built, China has proposed to match development strategies of various countries. This initiative is not going to be China's solo show, but a symphony performed by an orchestra composed of all participating countries by leveraging their comparative strengths. It will allow countries to take the express of Chinese economic development, share China’s development dividends and achieve mutual benefit and win-win on the basis of forming a community of interests. 

The core of the Silk Road spirit is to integrate economic elements and development resources on a global scale based on the principle of extensive consultation, joint contribution and shared benefits, make concerted efforts to cope with challenges faced by the world economy, create new opportunities for development jointly, expand new space of development, inject new impetus of development, promote sustainable development, achieve common prosperity and maintain peace and stability.  

Establish a long-term stable, sustainable financial mechanism for the building of the Belt and Road 

The General Secretary Xi Jinping stressed that financial support plays a key role in promoting the building of the “Belt and Road”. We need to expand financing channels, innovate in financing methods, lower financing cost and get through the key link of financing for the advancement of project.  

Firstly, insist on simultaneous implementation of multiple financing methods. The Export-Import Bank will actively play the leverage role of policy-based finance, and provide both preferential loans such as government concessional loan and preferential export buyer's credit, and development loans which obtain marginal profits on the basis of breakeven. Meanwhile, lead and promote the participation of commercial finance through syndicated loans and joint financing, strengthen the cooperation with development and commercial banking institutions and leverage all kinds of funds, which not only expand financing channels for the building of the “Belt and Road”, but also effectively lower financing cost. Provide both loans and investment, initiate, set up and well run international investment cooperation funds related to the building of the “Belt and Road”. Innovate in investment and financing modes, and promote Public-Private Partnership (PPP). Take actual conditions and willingness of countries where projects are carried out into account, and make an overall planning for the use of multiple financing modes.  

Secondly, insist on the participation of all parties. The building of the “Belt and Road” requires a substantial amount of funds. China’s input alone can hardly meet it. Since countries are all equal participants, contributors and beneficiaries, they should provide funds jointly. It is necessary to mobilize resources of all parties, mobilize the countries where projects are carried out to invest in the building or provide policy support, actively work together with the third-party country to develop markets, absorb international multi-lateral financial institutions and international funds and form the community of interests with common efforts and shared risks and benefits. The Export-Import Bank has regulated the credit granting of overseas official financial institutions according to the situation and risks, and further strengthened cooperation in the same business.  

Thirdly, stick to the principle of market-oriented operation and commercial sustainability. The building of the “Belt and Road” is not a short-term conduct for instant success and quick profits or a vanity project. We must focus on sustainable development. The investment of enterprises should focus on benefits. Sustainable value output should be guaranteed. Contract signing is just the beginning. Project construction is also just a part. What extremely matters is the operation and management after the completion of projects. Attention should be paid to avoid uncompleted projects which may result in heavy financial burden, or even give rise to political issues. Likewise, financial input should focus on benefits. The evaluation of economic benefits of projects should be strengthened. Priority should be given to supporting projects which can promote economic development of countries along the Belt and Road and enhance the capability of “blood making”. Policy-based finance should persist in obtaining marginal profits on the basis of breakeven, uphold market-oriented operation and take up a virtuous circle of development while actively supporting national strategies.  

Fourthly, expand the cross-border use of RMB actively. The building of the “Belt and Road” has provided favorable opportunities and important platforms for the internationalization of RMB. The use of RMB can decrease exchange rate risks and transaction costs, effectively promote export of Chinese products, services and technologies, reduce the dependence on foreign currency, open up independent and controllable financing channels, and provide sustainable financing support. This year, the Export-Import Bank has further strengthened the promotion of “cross-border RMB loan business” specially.  

Strengthen risk management and prevention in the building of the Belt and Road 

The support for the building of the “Belt and Road” faces challenges and tests at the macroscopic, mesoscopic and microscopic levels.  

Since the building of the "Belt and Road” and quality and benefits of capital input not only concern the capital security, but also influence the development of the “Belt and Road” cause, we must control risks strictly with a highly responsible attitude, always adhere to the principle of prudence, carry out every project well, pay adequate attention to every link and eliminate every potential risk.  

The Export-Import Bank will establish a research institute of economy and finance, vigorously strengthen country planning and industrial research, work out elaborate and highly operational country plans, and deal with the relation between financial support and risk control properly.  

Business should be conducted prudently, and meanwhile the situation of “one-size-fits-all” should be avoided. Specific projects should be analyzed specifically. For projects with broad business prospects which can promote Chinese products, technologies and standards to “go abroad”, active support should be provided on the premise that risks are controllable.  

The integration of investment, construction and operation should be promoted. Chinese enterprises should be encouraged to participate in the whole process from project construction to operation and management, to avoid any risk caused by problems in the operation and management. The qualification, credit rating, operation and management capability and experience of enterprises should be checked strictly. Besides, it is necessary to strengthen the evaluation of expected economic benefits of projects and financial conditions of enterprises and impose strict requirements for self-owned capital of enterprises to prevent the increase of potential risks caused by leveraging-up expansion of enterprises. 

With the blueprint drawn up, the key is to put it in to practice.  

Currently, the Export-Import Bank has supported more than 1,200 projects under construction for the building of the “Belt and Road”. These projects are distributed in more than 50 countries. The balance of loans exceeds 670 billion yuan.  

During the “Belt and Road” Forum for International Cooperation, the Export-Import Bank achieved 33 outcomes in total, accounting for 1/9 of the whole list, ranking the first among financial institutions. 28 loan agreements were reached, with the total amount up to about 42.5 billion yuan, involving 10 infrastructure connectivity projects related to railway, highway, bridge, port and telecommunication, and 18 economy and trade and production capacity cooperation projects related to thermal power, wind power, hydropower, power transmission and transformation, satellite, tire, mining, industrial park, etc. The Export-Import Bank will take actions actively, adopt targeted measures and work hard, aiming to complete the special lending scheme worth 130 billion yuan equivalent before the summit forum in 2019. 

(The author is the secretary of the CPC Committee and Chairman of the Export-Import Bank of China) 


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