Going forward, China may promote a wider range of financing options and more multilateral projects under the BRI. Various financing options involving multiple stakeholders in BRI projects could improve project management and decrease dependence on Chinese capital.
Private financing and co-financing had played a growing role in BRI projects even before the pandemic. We expect the current situation to speed this process. In March 2019, China’s Ministry of Finance signed a memorandum of understanding with several multilateral development banks to establish a Multilateral Cooperation Centre for Development Finance. According to research by Refinitiv BRI Database, 27% of total funding for Belt and Road projects has come from private sector or publicly listed firms.9 While the number is well below than the 46% of financing from government institutions, we expect the private portion to expand as the number of multilateral projects grows and China becomes increasingly open to the multilateralization of BRI.10
In addition to multilateral projects, financial market funding could help make up the gap in Chinese capital. According to a 2020 Central Banking survey conducted with 30 central banks in the BRI, a fair number of respondents expected funding for BRI projects to come from financial markets.11 The London Stock Exchange, for example, supports the BRI through a variety of services and initiatives. At the end of 2019, it facilitated the raising of USD80 billion in equity capital and USD170 billion in debt capital.12 It also seeks to provide a “world-class listing infrastructure” for the BRI.
Invesco Fixed Income expects more multilateral projects and a broader range of financing options to bring increased transparency, efficiency, and sustainability to BRI projects overall, potentially benefiting Belt and Road recipient countries. Notwithstanding additional financing options and multilateral projects, we expect China to provide strong support to Belt and Road projects going forward. In March, for example, the China Development Bank announced that it will provide low-cost financing and special foreign exchange liquidity loans to companies involved in Belt and Road projects.
Q: What pandemic-related interactions have taken place between China and the Belt and Road countries?
Since the emergence of the pandemic, President Xi has commented frequently on the building of the Health Silk Road. As the first country to appear to have contained the virus, China has actively donated medical supplies and equipment to other Belt and Road countries. Media reports suggest that China has donated at least 40 million masks to other countries (Exhibit 4). Most donations were made within Asia, with Iran and South Korea receiving the most. European countries, especially Italy, have also received major Chinese donations. China has sent medical experts abroad to help Belt and Road countries (Exhibit 5), and manyChinese tech companies are currently exporting coronavirus-related products and services overseas. Alibaba has offered its coronavirus response guide to several countries and Huawei donated wireless network equipment, smartphones and cloud platform access to Italian hospitals.