(From Caixin Online)
Highway builders and bus manufacturers are among the Chinese companies benefiting from bank support for Silk Road initiatives
By staff reporter Wu Hongyuran
From Pakistan’s biggest city to the border with Vietnam, Chinese companies are busy cementing major trade and business relations to build a foundation for the government’s Silk Road Economic Belt and the 21st Century Maritime Silk Road initiatives.
Solidly behind these companies is a wall of banks, including major policy and commercial lenders, eager to extend credit and offer cheap financing.
Chinese banks have considered the dangers of doing business in less-developed countries and concluded that the benefits of these “belt and road” projects far outweigh the risks.
Among the latest deals, the Export-Import Bank of China (Exim), a policy bank, recently agreed to finance a US$ 2.89 billion, 390 kilometer highway linking Pakistan’s largest city, Karachi, and second-largest city, Lahore. It also agreed to back a US$ 1.3 billion highway upgrade to improve travel between the cities of Havelian and Thakot.
The deals were signed on December 22 in the Pakistani capital Islamabad between state-owned contractor China State Construction Engineering Corp. and the National Highways of Pakistan agency.
Together, these contracts comprise the largest transportation-related infrastructure package so far under the US$ 46 billion China-Pakistan Economic Corridor initiative signed by President Xi Jinping and Pakistani Prime Minister Nawaz Sharif in May 2013. Ultimately, the plan calls for linking the Arabian Sea port of Gwadar in southwestern Pakistan to western China.
Meanwhile, Chinese companies are building a 105,000 square meter, 560 million yuan logistics center near the China-Vietnam border in the southern Guangxi region. The center has been designed to support trade between China and countries in the Association of Southeast Asian Nations bloc.
Another “belt and road” initiative is taking root in China’s far west, near the border with Kazakhstan. Through a special economic cooperation zone in the border city of Yili, companies have been receiving special financing aimed at encouraging investment and trade projects.
Even in the heart of China, in the Henan Province city of Zhengzhou, evidence of the “belt and road” campaign’s influence can be found in the form of an airport cum special economic zone project. The project’s goal is to make Zhengzhou a hub for aviation freight logistics and support a variety of “belt and road” businesses.
None of these projects would be going far without the blessings of bankers. The policy lender China Development Bank (CDB) is providing 350 million yuan in financing to cover some of the Guangxi project’s costs. For the Zhengzhou airport project, the bank issued 17.6 billion yuan worth of loans and set aside another 20 billion yuan for future credit. Commercial banks, such as Pingan Bank, have also helped finance the airport project.
Banks are enthusiastic about supporting Chinese companies that embrace the “belt and road” initiatives, said Zhang Xuesong, deputy director of Exim Bank’s Sichuan branch. Support has thus been generous for Chinese companies working on Pakistani infrastructure, which is a key component of the campaign, said Zhang Yu, deputy director of the banking regulator in the Xinjiang region.
Historically, China has imported Middle Eastern oil and commodities almost entirely through the South China Sea, said Deng Jianghui, an official working for the Kashgar Special Economic Zone near the China-Pakistan border. But importing commodities “over land from Pakistan through the port in Gwadar is 90 percent shorter.” Read more