Promoting Financial Cooperation Among BRI Countries

Financial support plays an essential role in promoting economic cooperation among BRI countries. Financial services for economies in BRI countries (BRI finance) are both development-oriented, as they attach importance to advancing the development of these countries, and commercial in nature, as such services also pay attention to the economic benefits and long-term sustainability of relevant projects as well as those of the financial support for these projects. BRI finance is mainly funded by policy financial institutions and state-owned banks, and mainly takes the form of bank loans. Currently, BRI finance mainly serves natural resource, energy, and infrastructure construction projects in developing countries in Southeast Asia, Central Asia, Africa, and Latin America. It has played an important role in alleviating poverty and boosting economic growth in BRI countries. Like early overseas investments conducted by some developed countries, BRI finance is led by governments. BRI finance focuses on infrastructure construction, and is based on the valuable experience amassed since China’s reform and opening up. In the past decade, BRI finance has greatly supported the connectivity and development of real economies in BRI countries. In the coming decade, we believe BRI finance has the potential for sizable growth. For example, diversifying participating entities and forms of finance, which helps improve performance, reduce risks, and enhance efficiency of investment and financing, has become a trend in economic development. This is evidenced by the following: (1) The universe of investors and lenders is expanding beyond unilateral policy financial institutions to include multilateral institutions and private sectors that work together or separately; (2) BRI finance is switching from a government-led model to a government-guided and sustainable market-based model that attaches importance to returns; and, (3) it is shifting from a bank loan-dominated model to a new, capital market-based model that is characterized by multiple financing options. BRI finance is still in its infancy. Looking ahead, we think infrastructure construction in BRI countries will continue to generate substantial demand for funding. Banks will continue to play an essential role in BRI finance, and capital markets will be crucial to expanding the range of financing options and improving investment efficiency, in our view. Domestic financial institutions can improve their capabilities in going global, advance financial connectivity in BRI countries, and build a flexible, stable, and resilient BRI financial system based on local conditions in order to boost long-term common development in China and BRI countries.