HKMA lines up financial partners for ‘one belt, one road’ projects

The Hong Kong Monetary Authority on Monday signed agreement with two international organisations as it separately launched an office to develop Hong Kong as a fundraising centre for the many infrastructure projects in Beijing’s “one belt, one road” scheme which is expected to require funding levels of US$8 trillion through to 2020.

The 4pm launch ceremony of the Infrastructure Financing Facilitation Office (IFFO) was attended by Hong Kong Financial Secretary John Tsang Chun-wah. An hour before the IFFO launch, HKMA chief executive Norman Chan Tak-lam signed two separate memorandum of understandings with two international organisations – one with Global Infrastructure Hub (GI Hub) chief executive Chris Heathcote and the other with International Finance Corporation (IFC) executive vice-president Philippe Le Houerou.

The agreements will establish a framework for them to cooperate on any fund raising projects. The IFFO and the two MOUs are designed to strengthen Hong Kong’s role as a fund raising centre,with some analysts expecting investment in Asian infrastructure projects to reach US$8 trillion in the years ahead,boosted by Beijing’s one belt policy that aims to finance infrastructure projects from India to Southeast Asia and the Middle East in a bid to promote trade and economies in the participating countries.

Tsang said at Monday’s ceremony that IFFO will play a vital role to help Hong Kong develop as a fund raising centre for the many infrastructure projects in the Asia region.

“The ‘belt and road’ projects will be golden opportunities for Hong Kong to strengthen its role as a fund raising centre. With unparalleled connections with mainland China and other Asian markets, as well as its financial market, Hong Kong is well placed to serve as the centre for project financing and asset management projects in the region,” Tsang said.

He added that both the stock and bond markets and banking facilities in Hong Kong could handle these fund raising needs.

The IFFO counts 41 partners so far, including international financial firms such as BlackRock, Blackstone Group, HSBC, Asia Development Bank, General Electric, KPMG, Canada Pension Plan Investment Board and a number of mainland organisations including Industrial and Commercial Bank of China, Bank of China Investment Corp, as well as Hong Kong’s MTR Corp, the Airport Authority and CLP Group.

Fung Group chairman Victor Fung and GE vice-chairman John Rice are advisers to the IFFO. The belt and road projects could also offer opportunities for many small and medium sized enterprises.

HKMA chief executive Norman Chan Tak-lam said IFFO is an integral part of the HKMA, with senior executives from the authority to lead the new office.

“As the premier international financial centre in Asia and the global hub for offshore [renminbi] business, Hong Kong is uniquely positioned to play a crucial role in facilitating the implementation of the ‘belt and road’ strategy,” Chan said.

HKMA deputy chief executive Eddie Yue said IFFO won’t do dealing matching but would act as a platform for the 41 partners to discuss fund raising matters. “There are many infrastructure projects in Asia which need to raise funds, expected to reach US$8 trillion over the period from 2010 to 2020, while there are investors who have money pending for investment opportunities. There are gaps between the two sides. The IFFO based in Hong Kong will be the first platform to fill in the gap,” Yue said.

As the first project under IFFO, the HKMA will host the Boao forum in Hong Kong on Tuesday for participants to exchange views on infrastructure fund raising and global fund flows.

In February the financial secretary had asked the HKMA to set up an infrastructure financing facilitation office to help arrange the many fundraising projects expected after Hong Kong becomes a member of the Beijing-led Asian Infrastructure Investment Bank later this year.

The establishment of the office would be a key plank in Hong Kong becoming a fundraising hub for the AIIB, a Chinese initiative linked to the one belt, one road scheme.

Many Western countries, including Britain, Germany and Italy, have joined the 57-member multinational bank, seen as a rival to the US-led World Bank, despite opposition from Washington.

The 60 countries in the one belt scheme represent 62 per cent of the world’s population but account for only 30 per cent of its economic output.

Hong Kong has always been a hub for China’s inbound and outbound investment. Last year, 68 per cent of foreign direct investment in mainland China – worth US$126 billion – flowed through Hong Kong. HKMA figures show overseas investment by Chinese firms in 2014 stood at US$123 billion, with 58 per cent going via Hong Kong.

China-related fund flows would further enhance Hong Kong’s role as a yuan hub, HKMA’s Chan said in April, with yuan deposits in the city now exceeding 1 trillion yuan (HK$1.2 trillion) and 665 billion yuan in loans and dim sum bonds raised here last year.