China’s strict capital controls are delaying the approval process for mainland companies to finance projects under the government’s “One Belt, One Road” initiative, according to industry players. “Mainland private companies now need at least three to six months to get approval from Beijing for them to get the money out of the country to finance many of the One Belt, One Road projects,” said Clement Chan Kam-wing, managing director of accounting firm BDO. “China has not banned such investment but the authorities have demanded more documentation and explanation as to how the money would be used, particularly for large amounts, above US$5 million.” He said that before the government toughened its rules on capital flight, it could take just two months to get the green light to finance a simple project. “Beijing does not want companies using these types of investment as an excuse to bring money out of the country to hedge against the loss in the valuation of the yuan. This has naturally delayed the approval process and is likely to continue this year until China reviews its capital control policies.” The yuan’s 7 per cent deterioration last year against the US dollar spurred many companies to go on a shopping spree overseas to park their currency offshore as a hedge. That prompted China’s currency regulator to enforce stricter scrutiny of overseas payments exceeding US$5 million, and to ban deals of more than US$1 billion that are deemed to be “outside the investor’s core business”, according to regulatory documents. This has hurt belt and road projects. Initiated by Beijing in 2013, the belt and road plan is aimed at building railways, ports, airports, roads and other infrastructure in 60 countries neighbouring China and in other parts of Asia, the Middle East and Europe to boost trade flow and economic growth. John Yeap, a partner at Pinsent Masons, an international law firm specialising in infrastructure financing, said many Chinese companies are interested in investing in belt and road projects but they now face tougher scrutiny to get the go-ahead. “Mainland companies now need to structure their investment appropriately if they want to get approval from the authorities to invest in One Belt, One Road projects, under the tougher scrutiny of the capital control measures,” Yeap said. As an example, he said several years ago mainland companies could easily get approval to invest in power plants with no need to provide much explanation. Nowadays, they need to show the authorities that their proposed investments are sensible. This may include proving that the power plant is in an ideal location, that the investment amount is reasonable and that local people will be able to afford to pay their electricity bill once the plant is operational. “I do not see a slowdown of investment in One Belt, One Road from mainland firms but they would all need to show that they are making sensible investment in these projects,” Yeap said.