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May 12, 2017

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Banks dismiss fears over Belt and Road loans

CHINESE loans to countries and regions along the Belt and Road will not add to the local debt burden, while risks arising from such loans are under control, bank officials said yesterday.

Ding Xiangqun, vice president of China Development Bank, told a press conference that the majority of projects it supported generated sufficient cash flow to pay back the principal and interest.

“It’s quite biased to say that our loans add to local debt burden as we choose the projects very carefully, making sure they have economic value,” Ding said.

The bank also had strict credit requirements for sovereign loans, she said, making sure the terms on these loans are in line with those required by the International Monetary Fund.

Sun Ping, vice president of the Export-Import Bank of China, said that it had established risk-control mechanisms to evaluate the feasibility of loans based on the upper limit of debt each country could bear, and widespread defaults on sovereign debts were unlikely.

“With strict measures to mitigate risks, I’m confident that the level of non-performing loans will remain under control,” Sun said.

Since the launch of the Belt of Road Initiative in 2013, the export-import bank has supported more than 1,200 related projects, with a contracted value that surpasses 700 billion yuan (US$101.4 billion).

By the end of 2016, the CDB had given more than US$160 billion in loans to countries along the Belt and Road to support development in industries such as infrastructure and energy resources, Ding said.

As China steps up financial support for the initiative, Chinese financial institutions are also increasing their global presence.

A China-proposed association to promote financial cooperation among Asian countries and regions will be established soon, according to Pan Guangwei, vice head of the China Banking Association.

The association will take the lead in its establishment of such an institution, Pan told the press conference.

An Asian financial cooperation association was proposed by Chinese Premier Li Keqiang at the 2016 Boao Forum for Asia, with the aim of improving markets and preventing financial turmoil.

By the end of 2016, nine Chinese-funded banks have set up 62 direct branches and representative offices in 26 countries along the Belt and Road, offering tailored services to local clients, Pan said.

At the same time, 54 commercial banks from 20 countries and regions along the Belt and Road had established branches, finance companies, or representative offices in China, seeking cooperation opportunities that arise from the initiative.

While providing financial support to the initiative, Chinese-funded banks are also improving their own global competitiveness, Pan said.

China will host the Belt and Road Forum for International Cooperation in Beijing this Sunday and Monday.

More than 1,500 delegates, including officials, academics, entrepreneurs, representatives of financial institutions and media organizations from 130 nations, as well as representatives from more than 70 international organizations, will attend.

The Belt and Road Initiative aims to expand links between Asia, Africa and Europe through billions of dollars in infrastructure investment.


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