Making sense of Belt and Road – The international bank: HSBC
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Making sense of Belt and Road – The international bank: HSBC

To Gordon French, head of global banking and markets for Asia Pacific at HSBC, Belt and Road is “a supercharger.”



What he means by that is that it attaches to a theme of infrastructure development that was underway anyway, but gives it a boost.

Few institutions are better set up for Belt and Road than HSBC. It has the history and scale in Greater China, coupled with international cross-border reach and expertise in a host of products and services that ought to benefit from BRI. “We are currently tracking north of 100, maybe 150 projects,” French says.

But are they going to be bankable, done on commercial terms that appeal to HSBC?

“Some will and some of them definitely won’t be,” French says. “And it won’t only be because of Chinese banks being very competitive in this market."

Apart from Chinese banks that the state might expect to participate, French notes the high liquidity of local banks in many Belt and Road markets, and the potential role of Japanese banks, “who are liquid and have an enormous incentive to go outside their home market and deploy capital into projects that sometimes we won’t look at, because their return hurdles might be different to ours.”

French is under no illusions that Belt and Road will include a lot of work HSBC will not want to pursue: “If one of our existing clients joins a consortium to help build a toll road in Tashkent, even though it fits Belt and Road – which we have prioritized – and is project finance and infrastructure, which we have also prioritized, we do not bank that country.

“But if that same client turns around the following week and says: ‘We need financing in the power grid in Vietnam or a port in Malaysia’, we’re much more likely to see that as potentially bankable.”


Is he saying that HSBC’s balance sheet will not be heavily committed to the big projects so much as the peripheral work that goes around them? 

“We will be selective, but there will be opportunities we want to pursue,” he says. “Clearly banks have to work with the capital treatment that is applied to long-dated assets in emerging markets, so we will try to make the financings shorter-dated and try to build paths to takeouts through capital markets.‎"

“There will be a lot of financing to be done, and if you can do the short-dated financings or participate in the tranches of the longer-dated financings but with a path to takeout in the capital markets, that’s clearly what our preference will be.”

Gordon French, HSBC

Which single HSBC business stands to benefit the most? “The most obvious will be the infrastructure sector team, because they add the most value and they are the first in,” he says. “It’s clearly the coverage teams and advisory bankers who are engaged there who will be deepest inside the tent earliest.” Next comes project finance and the products within it: credit and lending, debt capital markets, potentially equity capital markets, trade finance, foreign exchange, interest rate hedging, payments and cash management.

“I know I just said a lot,” says French. “But all of these will be beneficiaries, and different ones at different moments in time. So, for example, DCM will come before ECM, but they will both need to be at the table.”

But given that HSBC was doing all these things anyway and covering hundreds of Chinese state-owned enterprises, did anything actually change internally for Belt and Road when it was announced?

“I would say nothing in terms of the heavy hardware.” He describes a slight change of mindset in terms of state-owned enterprise coverage: “Have we been focusing on them in the right way for this type of business? Have we been more focused on global transaction banking than large-event financings and infrastructure financings? We might want to put more senior people on the account, might want to send our chairman in to say: ‘We will be there with you when you go and do this’, which is a different kind of conversation to a trade finance or foreign exchange conversation.”

In practice HSBC found very little that it had to change. And as to whether Belt and Road is just a slogan to which a host of infrastructure attaches itself that would have been done anyway, French says perhaps it does not matter.

“Whether it is anointed as a Belt and Road project or not, we will look at it like this: ‘Is it bankable?’”

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