South Asia is vital to the New Silk Road. But it can be a tough region in which to do business. Its powerhouse sovereign, India, is wary of the project, while Pakistan, desperate for capital, is often beset by political turbulence. In this context, China needs a determined, committed and well-capitalized home-grown lender, capable of driving the geopolitical project of the century.
Fortunately, it has just that, in the shape of China Development Bank, its leading policy lender. No Chinese financial institution is more committed to the region. In January this year, it signed a memorandum of understanding that pledges to channel Rmb10 billion ($1.45 billion) to Standard Chartered, which the UK lender will lend on to worthy BRI projects over the next five years. In December 2017, it was a key player in a 10-year, $700 million syndicated term loan raised for Pakistan’s finance ministry, which included StanChart and Bank of China, and which secured partial guarantees from the World Bank.
CDB was also essential to an $883 million coal-fired power plant built by Lucky Electric Power Company (LEPC) at Port Qasim. The complex deal, which required operators to source 30 years’ worth of coal from Thar Desert in Sindh province, benefited immensely from CDB’s participation.
In 2016, CDB provided Karachi-headquartered lender HBL with a $300 million credit line for large infrastructure projects and another $200 million to extend short-term liquidity to sectors and projects directly connected to the Belt and Road Initiative. A sizeable portion of those facilities was put to work on the LEPC project, again underlining the regional power and influence of a 24-year-old policy lender dedicated to supporting China’s grand BRI ambitions.