Making sense of Belt and Road – What it means for banks

The problem with China’s Belt and Road Initiative is getting a handle on the thing. We know it is big: we all know by now that the countries it embraces account for two thirds of the world’s population and 30% of global GDP. We can all raise our eyebrows at the $900 billion of planned investments and the grand ambition of taking on 65 countries in a single policy. But what, really, does all that mean?

We can only answer that by getting down to details with the people involved – and the stakeholders in Belt and Road are numerous. Until you know what Belt and Road means for a Chinese state bank or an international investment bank, a project borrower or a multilateral, a commercially driven institutional investor or a Chinese state investment arm, a private banker or a health NGO, you haven’t got the whole picture.

So that is what we have set out to do. Over the last few months Euromoney has sought the views of 16 institutions with a different perspective on BRI, and asked them two things: what does it mean to you today and what will it mean in the future?

One lesson that comes from all of this is that the most frequently asked question – ‘what constitutes Belt and Road?’ – is the wrong one to ask.

Belt and Road has become a catch-all term that banks and policymakers alike are already attaching to projects with the most tenuous of links to the actual idea. Is a domestic Indonesian railway Belt and Road? What is the rule? Does it just need to involve Chinese money, or Chinese construction contracts? Or does it need to be anointed a Belt and Road project from the highest levels of the state?

Ultimately, it does not matter. One international banker calls it a supercharger. One Chinese banker calls it a paraphrasing of globalization. It is probably true to say that all Belt and Road does is add gusto and political force to a trend that was underway anyway, and that the misuse of the term for marketing purposes is rife. But who cares? If it adds to the development of badly needed infrastructure in Asia and beyond and creates commercial opportunities along the way, it doesn’t really matter what it is called, or what fits within the various Venn diagrams of Chinese policy and multilateral initiatives.

There are, however, big questions about those commercial opportunities, because it is not a given that prudent international capital will take part in Belt and Road projects. It must be coaxed, through robust and fair investment frameworks, through the participation of multilaterals or state vehicles assuming some of the risk and through clear methods of exit. No matter how much China cajoles its domestic institutions into taking part in projects, the sheer scope of Xi Jinping’s vision simply cannot be achieved without outside help, in terms of both capital and advice. The most interesting part of Belt and Road is how that process unfolds in the years ahead.

The New Silk Road Click on text boxes to see more

		The Chinese driver		The Silk Road Fund
		The international bank		HSBC
		The Chinese policy bank		China Development Bank
		The institutional investor		Macquarie
		The Chinese commercial bank		ICBC
		The Chinese multilateral		AIIB
		The Belt and Road project borrower		Karot Hydropower, Pakistan
		The Non-Belt and Road project borrower		Southern Gas Corridor, Azerbaijan
		The international multilateral		Asian Development Bank
		The Belt and Road country		Armenia
		The China analyst		CLSA
		The Asean bank		UOB
		The China bank overseas subsidiary		ICBC Standard Bank
		The private bank CIO		Credit Suisse
		The NGO		Project Hope
		The white elephant		Mattala Rajapaksa International Airport, Sri Lanka