China seen as ideal funding source for BRI

With low inflation and high savings rates, China is able to provide large-scale, low-cost funds to Asia and countries involved in the Belt and Road Initiative, while investors and capital markets should pay greater attention to the attractiveness of the investment and financing markets in, and cooperation between, Global South and BRI economies, experts said.

The remarks were made at the China Investment Corp (CIC) Forum 2023 and Cross-Border Investment and the International Industrial Cooperation Conference organized by CIC on Wednesday in Hong Kong.

CIC is one of the world's largest sovereign wealth funds, with net assets reaching $1.17 trillion.

Zhou Xiaochuan, a member of CIC's International Advisory Council and former governor of the People's Bank of China, said the global economy is facing several challenges ahead.

First, global inflation has affected monetary policy formulation, cross-border capital flows and global financing costs. Emerging and developing markets are facing further difficulties in accessing financing in international markets.

The rise of anti-globalization and trade protectionism has severely impacted international trade, investment and financial cooperation, leading to the adjustment and reorganization of global industrial and supply chains.

But the green revolution, as well as the development of science and technology, such as artificial intelligence, renewable energy, life sciences, bioengineering and other breakthrough applications, caused the reorganization of the industrial chain, whereas the financial and investment communities must adapt to this change.

"Asia will continue to be the main driving force of global growth and BRI countries will be important growth points in the next step. However, the global capital market has not fully grasped and prepared for this major trend and has made inadequate strategic adjustments in capital deployment direction and structure," Zhou said.

The former governor of the country's central bank said that China has a role to play in the global financing market amid monetary policy adjustments by global central banks due to high inflation.

"Countries with low inflation and high savings rates such as China can provide large-scale, low-cost funds to Asia and BRI countries. The powerful sovereign wealth funds of many Asian countries can make important contributions to medium and long-term investments in the region," Zhou said.

"As trade and investment markets become increasingly fragmented and barriers increase, the investment and financing markets and cooperation between Global South countries and BRI countries will become more attractive and deserve greater attention from investors and capital markets," he emphasized.

Zhou also said investors should deploy capital to renewable energy and high-tech innovation to cement green and low-carbon industrial and supply chains that recombine factor resources, markets, upstream and downstream industries, production and consumption. "The investment community's continued investment in technology, information, human resources and capital is crucial," he added.

Peng Chun, chairman and CEO of CIC, said at the forum: "Cross-border investment is an important link to promote international industrial cooperation and an indispensable booster of global sustainable development. Cross-border investment and industrial cooperation will develop in a more open, inclusive, win-win and sustainable direction."

Looking ahead, Peng said CIC is positioned as a long-term institutional investor providing long-term investment for the sustainable development of the world economy, with an insistence on innovating methods in overseas investment and promoting international industrial cooperation and win-win results.

The Chinese sovereign wealth fund will also adhere to the concept of responsible investment and promote global green and low-carbon development, as well as strive to expand the cross-border cooperation ecosystem and promote global exchanges.

Jim Kim Yong, vice-chairman and partner of Global Infrastructure Partners as well as former president of the World Bank Group, said: "The BRI has played an extremely important role in cross-border investment that has led to an estimated $1 trillion in investment initiatives with massive amounts of capital.

"I have welcomed the BRI and more importantly, so many of the members have benefited from it."