‘Belt and Road’ to need up to US$6 trillion in funding over next 15 years, says HSBC head

Bank poised to provide services to major infrastructure projects and to help SMEs interested in trading with companies along the trade routes

PUBLISHED : Sunday, 19 June, 2016, 6:57pm
UPDATED : Sunday, 19 June, 2016, 7:03pm

HSBC plans to capture all types of business related to the “One Belt One Road” trade initiative which is expected to require the banking sector in the region to raise up to US$6 trillion of funding over the next 15 years, according to its Asia Pacific chief executive Peter Wong Tung-shun.

“The One Belt One Road projects will involve many infrastructure projects including railways, roads and related development projects,” Wong said in an interview.

“The amount of money needed to be raised would reach between US$4 trillion to US$6 trillion.

“No single government is going to be able to finance such a huge sum of money and Hong Kong and the banking sector can play a role by helping raise funds via bonds or shares.”

Announced by Beijing in 2013, the One Belt, One Road project is aimed at establishing linkages between 60 countries on the silk road economic belt.

It plans to build railways, roads and other infrastructure to link mainland China to India, the Middle East and South East Asia countries, to promote cross-border trade.

Wong said he led a team of senior executives in Thailand and Malaysia to explore opportunities there last month related to the Belt and Road initiative, and plans to visit Indonesia and Singapore next month to carry out similar analysis in those markets.

“We will be targeting a wide range of businesses, including infrastructure financing, project lending, trade finance and forex trading.

“We will serve governments, multinational firms, and small and medium-sized enterprises (SMEs),” he said.

During his visit to Thailand and Malaysia, he identified railway projects which could help link China to both countries, which would need to be funded via bond or share issues.

“These railway projects may not make money in the near term but the development of property and other projects along the railway line would boost economic growth and cross-border trade,” he said.

Although many Hong Kong SMEs may not be involved in the largest infrastructure projects, they may be able to land trade and technology-related projects as subcontractors in the One Belt One Road countries.

“This is why HSBC is not just looking at delivering the funding requirements of the infrastructure projects but also providing commercial banking and trade financing services to the many SMEs in Hong Kong who may be interested in trade with companies along the routes,” he said.

Wong said another key function of the One Belt One Road is to promote the internationalisation of the yuan, as some bond raising will be denominated in the currency.

“New infrastructure will increasing provide trade linkages between these countries, and Chinese companies involved will be looking to use the yuan to settle trades,” he said.

“This will further RMB business in Hong Kong, and HSBC has always been keen on developing its yuan business,” he said.

Yuan deposits in the city now exceeding one trillion yuan (HK$1.2 trillion) and 665 billion yuan was raised in loans and dim sum bonds here last year.