Investing International Capital on the Belt and Road

(Photo: jianying yin/Getty Images)


By Gracie Sun

The expansive potential of green finance along the major Chinese-led Belt and Road Initiative (BRI) is widely recognized, and the immediate focus has shifted to translate these possibilities into concrete actions and measures to green the Belt and Road.

The Paulson Institute (PI) and The Center for Finance and Development of Tsinghua National Institute of Finance recently convened a wide range of experts including representatives of major funds, investment banks, and policy makers to discuss ways to improve the greening of the BRI and to mobilize international capital for investments in those Belt and Road countries. Senior-level participation on both the U.S. and Chinese sides indicates the importance of green finance and BRI to both countries and to the larger global sustainable development agenda.

The discussion among the experts focused on various BRI related issues including the development of voluntary environmental risk management principles and functional financial risk management products. There is great capacity for international financial centers and international capital to engage with the BRI on the aforementioned issues.

Below are some of the key themes surrounding international finance on the BRI.

  1. Belt & Road projects tend to be for a longer-term horizon, which requires serious financing commitments typically not met by any single party. A multi-stakeholder approach is needed for Belt & Road projects including the participation of private capital.
  2. Private capital in China and other parts of the world is not in short supply, but simply need the right vehicle to be directed to Belt and Road projects. An innovative cross-border public-private partnership model could be such a platform to encourage the private and the public sectors to work together. This would put the BRI on solid and sustainable footing for future endeavors.
  3. Most of the projects under the BRI are infrastructure projects that promote green technology, involve green capital, and loosely begin to establish a green standard. These projects will have a significant impact to the green development of the countries along the Belt & Road.

It is essential that the gap between capital from global financial hubs and BRI projects be understood and filled to capitalize on this opportunity to have substantial greening impact. To begin this process, experts believe that it begins with identifying successful green projects that can be replicated across the board, creating a sustainable business model from them, and enabling investors to reap concrete benefits. At the same time, international financiers should be aware that investment in BRI projects will undoubtedly introduce Chinese technologies to partner countries, scale up the Chinese green investment model to be applied to more countries along the Belt & Road, and entice still more private capital to be committed to the Belt & Road.