Potential funding problem for China’s One Belt One Road initiative was discussed on South China Morning Post on Friday morning.
In the panel discussion Alicia García Herrero, chief economist of Natixis for Asia Pacific region, said that in the current macroeconomic conditions such as constraints in US dollar financing in China, loss of US$800 billion in foreign reserves due to yuan depreciation, interest hike could make it more complicated for China to raise finance for projects in One Belt One Road initiative. In addition, these conditions provoque capital outflows. Nevertheless, in her opinion, if China Development Bank rises funding in Hong Kong and lends it to Russia that will not be seen as an capital outflow for China.
However, her co-panelist Hu Yifan, regional chief investment officer of Greater China at UBS, argued that interest rates as well as inflation growth is observed globally, which makes inevitable for funding cost to remain low. Nevertheless, we still observe cheap funding in policy banks such as China Development Bank. In addition, there is strong interest from private sector to take on some Belt and Road projects.
The main recipients of lending from China are Russia and Pakistan while Europe could be the biggest beneficiary of China’s infrastructure investments. However, both panelists agreed upon the potential trade difficulties that might arise in Europe due to Brexit.
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