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Wednesday, September 13, 2017

CEIBS Forum Looks at Investment Opportunities from Belt & Road Initiative

September 13, 2017. Munich, Germany – Chairman of the SINO-CEE Fund Jiang Jianqing today outlined new financing models available within the context of the ambitious China-led Belt & Road Initiative (BRI). He was speaking, at CEIBS 3rd Europe Forum 2017 in Munich, to an audience of business leaders interested in doing business in and with China. During the same event, CEIBS Dean Professor Ding Yuan tackled, head on, some of the scepticism about the BRI and stressed the opportunities it brings for those who embrace the project.

“The first phase of funding [for the SINO-CEE Fund] is steadily moving forward with a batch of high-potential projects registered – in infrastructure, manufacturing, and mass consumption. Meanwhile, a lot of domestic and international companies and financial institutions have shown great interest in investing in the Central & Eastern European  market, looking for partners and investment opportunities through our platform,” said Jiang who is also Adjunct Professor of Finance at CEIBS and Director of CEIBS Lujiazui Institute of International Finance. Innovations had been made to the financial services model, he said, to ensure that the Fund was in line with the regional traits and development goals of the countries of Central and Eastern Europe (CEE).

The Fund was established under the auspices of the Industrial and Commercial Bank of China (ICBC), of which Jiang is a former Chairman. It facilitates financial collaboration between China and CEE as well as other markets that have ties with those regions of Europe.  It is therefore vital to the BRI. “The future scale of the Fund will reach 10 billion euros, and it is expected to leverage 50 billion euros of supporting funding, focusing on projects with high commercial potential in terms of industrial integration and upgrading, and projects that demonstrate strong impetus in driving regional economic growth,” Jiang said.

However there have been sceptics who have questioned whether the BRI is a worthwhile investment. For example Dean Ding Yuan noted that there had been questions raised, in some sections of the media, about whether the initiative would bring solid financial returns. The Laos railway, for example, is expected to be a loss maker for its first 11 years, he noted during a wider look at whether the BRI should be viewed as neo-imperialism. Dean Ding told the audience that these concerns were based on a static view of China’s economic development that failed to accurately capture its dynamism. The BRI, he stressed was China’s effort to replicate its own economic success – the result of a virtual circle between real estate, development finance, infrastructure, growing domestic demand, and more efficient trade routes.  “The Chinese government wants to replicate its successful development story. Land and infrastructure become the collateral for the next wave of investment,” he explained. “Once you have trade it creates more value to real estate, which provides collateral for the next wave of financing, creating a virtual circle.”

He also acknowledged sceptics’ concerns about the “no-strings financing” that the BRI will provide, as China – unlike western offers of aid – adheres to an approach of not interfering in investor countries’ affairs on issues such as “human rights, clean governance or fiscal restraint”. He assured the audience that the BRI, as a facilitator of global trade, would bring opportunities for both developing and advanced economies; see all parties benefitting from lower transit costs and standardised services; unlock key markets in Southeast, South & Central Asia, Central & Eastern Europe and Africa; as well as boost the flow of trade, capital and goods.

The BRI, he added, would bring both tangible properties (physical projects such as rail and highway, etc.) and intangible assets such as an interconnected banking system (through the Silk Road Investment Fund, SINO-CEE Fund, the AIIB and similar institutions), trained workers and standardised services. He also expressed confidence that business interests in BRI participating countries were savvy enough to protect their own interests. “Don’t underestimate the patriotism and intelligence of business leaders in countries such as Pakistan and Africa, etc. They are much more international than Chinese executives, more globally aware. They will protect their own interests,” said Prof. Ding.

Within the wider context of the BRI, today’s half-day event also provided insight into how German and Chinese companies are working together, by looking at past examples such as Chinese conglomerate Fosun’s acquisition of Frankfurt-based private bank Hauck & Aufhäuser in 2015; Fujian-headquartered Contemporary Amperex Technology Co. Limited that expanded into the German market; and Germany’s KDX Europe Composites that set up an R&D centre in China by partnering with a Chinese tech company.

There was also a look at the potential synergies between China’s Internet Plus policy – aimed at integrating the internet with traditional businesses to fuel economic growth – and Germany’s Industry 4.0 future for the vision of manufacturing. This included case studies on NextEV (China’s answer to Tesla) and Alipay, the China-born third-party mobile and online payment platform with global ambitions.

Today’s event in Munich is the third in this year’s series of CEIBS Europe Forum. More content generated from this and previous events in London and Paris are available here. The next event will be in Warsaw on September 15. The CEIBS 3rd Europe Forum 2017 is part of CEIBS’ efforts to provide the political, business and academic communities in China and Europe with an opportunity to offer insights into crucial international issues.


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Charmaine N. Clarke