China eyes Islamic finance to increase economic influence overseas
Aim to strengthen trade ties with Asian nations is driving demand for sharia-compliant banking
Islamic finance is gaining prominence as a channel for China to expand its economic influence abroad as banks strengthen ties with Muslim-majority countries and Chinese companies start to tap offshore pools of Islamic funds.
With a Muslim population of about 20 million, China has little reason to develop Islamic banking at home. But there are powerful reasons for it to get involved in the sector overseas.
China wants to build stronger trade ties with Asian countries under its "one belt, one road" strategy to rebuild Silk Road trade links with Asia and Europe.
The network will include the world's main centres of Islamic finance, the Middle East and Southeast Asia, where sharia-compliant assets account for as much as a quarter of total banking assets.
"With 'one belt, one road', (Chinese) state-owned enterprises and private companies are now more willing to explore Islamic finance," said Hong Kong-based Ben Ping Chung Cheung, Asia Pacific head of consultancy Shariah Advisory Group.
The firm is advising conglomerate HNA Group on what could be the first Islamic financing by a mainland firm: a US$150 million deal to buy ships.
HNA also plans an offshore issue of sukuk (Islamic bonds), Cheung said.