China Development Bank and China EximBank should consider the sustainability of New Silk Road projects

21 May 2018

The China Development Bank (CDB) and the Export Import Bank of China (EximBank), the central financial vehicles for the “Belt and Road” strategy, are increasingly working with multilateral financial institutions and should strengthen sustainability in the new projects, according to three researchers from non-governmental organisation Chatham House.

In the paper entitled, “The Role of Investors in Promoting Sustainable Infrastructure Under the Belt and Road Initiative,” researchers Alison Hoare, Lan Hong and Jens Hein analysed DBC and Eximbank policies on overseas investment, concluding that their infrastructure finance includes preferential loans to foreign governments, loans and export credits to Chinese companies operating abroad, and investments in private equity funds.

These banks are “able to influence how companies manage environmental risks and carry out acquisitions” and “are working more and more with the international financial institutions” in projects of the ‘Belt and Road’ initiative, seeking to harmonise their policies.”

In the study, released this month, the researchers provide a set of recommendations to China’s investment banks, especially to encourage government creditors to adopt sustainable public procurement.

Banks “should make explicit that sustainability criteria can be considered by government creditors as part of value assessments for infrastructure procurement projects,” they note.

“This model indicates China’s ability to influence government procurement decisions,” they said.

Multilateral banks and development finance institutions are recommended to require creditors to adopt sustainable procurement for all high-risk supply chains in projects.

The chairman of the Cooperation and Development Fund between China and Portuguese-speaking countries said at a recent conference in Lisbon that business projects involving China and Portuguese-speaking countries have been receiving official Chinese funding but that the deepening of this cooperation, in the “era” of the “New Silk Road,” requires innovative financial mechanisms.

Chi Jianxin said that “the Belt and Road is highly compatible with the development plans of many Portuguese-speaking countries and has a strong complementarity in terms of capital, technology, resources, markets, etc., driving new opportunities for commercial expansion, economic and investment cooperation between China and those countries.”

The head of the fund also said that trade and investment cooperation between China and other Portuguese-speaking countries and regions is also increasing, with China becoming one of the most important trade partners with the trade balance in 2017 to exceed US$100 billion for the first time. (macauhub)