The $1trn “one belt, one road” is full of risk
OBOR is an infrastructure and industrial initiative that aims to strengthen economic and trade connections from China’s west into Central Asia and beyond, and also into Southeast Asia toward Africa.
State banks and financial institutions are preparing to provide funding for projects and Chinese companies will benefit from related infrastructure and industrial projects.
Bank of China plans to support the initiatives by lending $100bn over the next three years. China Construction Bank will get involved by opening eight new branches overseas this year.
Some say “one belt, one road” could eventually spur more than $1trn worth of business.
But the initiative is riddled with risks. Investors will face “complex issues stemming from diverse political, social and economic conditions in countries targeted by the initiatives” and starkly different legal, environmental and technological standards, according to a source at ICBC.
Other experts have pointed to the potential for waste. “They say a short-lived burst of enthusiasm may spur overspending that leads to heavy debt burdens for borrowers and lenders”.
In addition, overspending could lead to heavy debt burdens for borrowers and lenders.
“That’s exactly what happened after the government responded to the 2008 global financial crisis by overdoing it with 4 trillion yuan in stimulus spending. Some of that spending was unnecessary, officials say, and fueled debt buildup that lingers today.”
Caixin, June 17
RQFII and QFII approvals for May
RQFII
|
Company |
Country |
Approval date |
Amount (RMB) |
|
CSAM Asset Management |
Singapore |
29/05/2015 |
700m |
|
Allianz Global |
Singapore |
29/05/2015 |
1bn |
|
GAM International Management |
UK |
29/05/2015 |
1.8bn |
|
Harvest Global Investments (UK) |
UK |
29/05/2015 |
3bn |
|
Lyxor Asset Management |
France |
29/05/2015 |
6bn |
|
Samsung Securities |
Korea |
29/05/2015 |
3bn |
|
Daewoo Securities |
Korea |
29/05/2015 |
2bn |
|
Kyobo AXA Investment Managers |
Korea |
29/05/2015 |
1.5bn |
QFII
|
Company |
Country based |
Agent Bank |
Approval date |
Amount (RMB) |
|
E.Sun Commercial Bank |
Taiwan |
Bank of China |
29/05/2015 |
50m |
|
The Regents of the University of California |
US |
Deutsche Bank |
29/05/2015 |
400m |
|
Fullgoal Asset Management |
HK |
HSBC |
29/05/2015 |
200m |
|
Taikang Asset Management |
HK |
ICBC |
29/05/2015 |
280m |
|
Nan Shan Life Insurance |
Taiwan |
Citibank |
29/05/2015 |
50m |
|
City of London Investment Management |
UK |
HSBC |
29/05/2015 |
600m |
|
Capital Securities Investment Trust |
Taiwan |
HSBC |
29/05/2015 |
250m |
|
KB Asset Management |
South Korea |
Citibank |
29/05/2015 |
300m |
|
BNP Paribas Investment Partners |
HK |
Bank of China |
29/05/2015 |
570m |
|
HSBC Global Asset Management |
HK |
Bank of Communications |
29/05/2015 |
376m |
State Administration of Foreign Exchange (SAFE), June 17
Bank of China to launch small-mid cap A-shares fund
The Bank of China (Hong Kong) plans to cooperate with its holding company, the Bank of China, to introduce a small-to-mid cap A-shares fund and a “hybrid” A-share fund, according to Leung Wai Kei, BOC’s global VP of marketing.
Leung is confident that the funds will be available in the third quarter.
These new funds will invest in a range of A-shares and are expected to benefit investors when the markets are bullish.
Mutual fund recognition, which will start on July 1, will widen A-share investment channels and the BOC wants to be well-positioned to take advantage of new capital inflows.
Leung believes the new A-share fund will be sufficiently differentiated from funds sold through the QFII and RQFII schemes and from ETFs.
China Securities Journal, June 16
