written by Chen Libing / translated by Gao Qianqian

The Financial Impetus for the Construction of the 21st Century Maritime Silk Road

written by Chen Libing / translated by Gao Qianqian

With the upsurge of constructing the 21st Century Maritime Silk Road, an increasing number of marine enterprises hope to take a free ride on the Maritime Silk Road construction projects. However, compared with traditional projects, these construction projects have long cycle and is highly-technical. Therefore, when marine enterprises vie for the “cake” of maritime economy, they need to find the proper financing platforms and financial service systems, by which they could proceed unimpededly.

Capital is the “Soft Spot”

The 21st century is the century of ocean. How to explore and utilize marine resources and develop marine economy has become a new topic for countries all over the world. Especially with the proposal of constructing the 21st Century Maritime Silk Road, a great fervor for managing ocean and developing marine economy has been raised by enterprises from China and other countries along the road. However, as projects emerge one after another, problems on fi nancial support follow accordingly.

On the one hand, with the accelerated construction of the 21st Century Maritime Silk Road, China is striving to improve infrastructural connectivity with countries along the road in high-speed rail, pipeline, port, airport and communications etc., which needs abundant financial support. On the other hand, marine enterprises also need a big financing platform to back their research and purchase of equipment when exploiting marine industries. Traditional marine industries like marine fishery and marine transport, in particular, generally lag behind in technical equipment, technicalization and risk resistance.

Taking marine transport for example, though China and ASEAN have long coastlines and fi ne ports, most of the sea waters does not have neighboring supporting docks and coordinated development of mainline ports and feeder ports. At the same time, portbased modern logistics service network has not yet been established. So, traditional marine industries are badly in need of an overall financial support to optimize and upgrade themselves via a variety of fi nancial products including loans, mergers & acquisitions, and fi nancial leasing etc.

With regard to this, some experts hope that the government could off er fi nancial support to enterprises engaged in the “One Belt, One Road” construction, including expanding financial channels, establishing overseas investment risk funds, and providing security fund for enterprises investing abroad.

Way of Financing

On October 11, 2014, China made theproposal to establish the Asian Infrastructure Investment Bank (AIIB) and a $40 billion Silk Road fund, which aim at providing financial support for the Asian-Pacific region and countries along the “One Belt, One Road”. In such a context, enterprises joining the construction of the 21st Century Maritime Silk Road could have their eyes on these two fi nancing projects.

The AIIB is an inter-governmental institution for the multilateral development of Asia. On April 1st, 2015, as Netherlands, Russia and Denmark etc. declared officially to join the AIIB, the number of AIIB founding members reached 51. It is reported that the initial registered assets of AIIB is $50 billion, and it is expected to be offi cially established and put into operation by the end of 2015. At the scheduled time, it will provide financial support for infrastructure construction of the Asian-Pacific region, including loans, equity investment, and guarantee etc, so as to boost investment in transportation, energy, telecom, agriculture and city development.

Established in November, 2014, the Silk Road fund has started running, providing fi nancial support for connectivity-related projects such as infrastructure, resource development, industrial cooperation and financial cooperation for countries along the “One Belt, One Road”. It does not have an upper limit, which means its financing scale is going to increase continuously, pooling government and social funds, commercial funds, and money from fi nancial institutions.

Though different in operation pattern and service scope, the two fi nancing projects have one common point, i.e., directed to the priority area of the 21st Century Maritime Silk Road construction – infrastructural connectivity. Therefore, the establishment of AIIB and Silk Road fund provides a hard-won opportunity for enterprises engaged in the construction of the 21st Century Maritime Silk Road.

According to several institutional investors, the“One Belt, One Road” strategy will continue to release political bonus in the following 10 years. The large-scale infrastructure construction in the initial stage, the exploitation and utilization of resources followed by, as well as the overall services in trade in the future, will bring investment opportunities for multiple industries and industrial chains. By virtue of the two fi nancing platforms, enterprises joining the construction of “One Belt, One Road”could show their capabilities in transportation infrastructure, energy infrastructure and communication network of countries along the way.

“Asian countries, especially countries along the‘One Belt, One Road’, are mostly developing countries and less developed countries, whose infrastructure construction is weak and transport facilities need to be developed. And the Silk Road fund is going to play an important role. It would solve enterprises’fi nancial problems and free them of worries”, said Lu Zhengwei, chief economist of China’s Industrial Bank.

“Blue Finance” to “Off er All to Help”

Moreover, in recent years, with the rapid development of marine economy, some nongovernmental commercial banks have also innovated their fi nancial systems and products to serve marine economy, trying to open a financial channel for the construction of the 21st Century Maritime Silk Road, together with the AIIB and Silk Road fund.

In November, 2014, China Ping An Bank signed a financial cooperation agreement with China-ASEAN Marine Product Exchange to tailor-make RMB cross-border service systems. By working with overseas agencies, it helps enterprises from the Exchange to carry out cooperation in the 21st Century Maritime Silk Road region, and further promotes the upgrading of marine industry.

Besides, branches of China Construction Bank, China Minsheng Bank and Hua Xia Bank in China’s 14 coastal open cities have already opened marine credit business and set up financial service platforms specific to port logistics enterprises’ financial need to back port economy. Meanwhile, they work with China’s coastal provinces like Fujian and Shandong, providing direct and indirect fi nancing to their key marine industries such as marine fishery, marine transport, and marine oil and gas.

The ASEAN countries which also have advantages in developing marine economy have regarded the construction of the 21st Century Maritime Silk Road as a hard-won opportunity and have taken an active part in it.

Founded in 1945, Kasikornbank owns over 1,000 branches and business offices in Thailand and have 11 branches overseas, among which 6 are in China’s mainland. Wichai Kinchong Choi, Senior Vice President of Kasikornbank, stated at the International Seminar on the 21st Century Maritime Silk Road held in February, 2015, in the hope of taking the opportunity of constructing the 21st Century Maritime Silk Road to provide services for Chinese enterprises investing in Thailand. “We offer trade financing, loans and commercial consultation, and we have many plans such as high-speed rail. We are also fi ghting for opportunities to provide fi nancial services for enterprises”, said Wichai Kinchong Choi.

Now, the construction blueprint of the 21st Century Maritime Silk Road is unfolding. Financing service and monetary circulation are important guarantees for the construction. Only by making good use of the AIIB and Silk Road fund could enterprises sail with the wind in project construction.

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