China banks 'raising billions' to fund Belt and Road push

HONG KONG • China's largest state-owned commercial banks are said to be raising tens of billions of dollars to fund the country's Belt and Road investment push, bolstering Beijing's ambitions as private capital pulls back.

According to people familiar with the matter, China Construction Bank (CCB), the country's second-biggest bank by assets, was raising at least 100 billion yuan (S$20.5 billion) for a fund to specifically finance such investments.

The people said CCB was raising cash onshore and offshore, and has already been running roadshows with investors.

Bank of China (BOC), another major state bank, aimed to raise around 20 billion yuan for a similar fund, according to two of the sources.

The cash, raised via banks' private equity or other investment platforms, is part of a broader push sponsored by China's central bank to use onshore yuan capital for offshore investments, including Belt and Road deals, according to one of the sources.

The other two of China's "big four" banks - Industrial and Commercial Bank of China and Agricultural Bank of China - are considering similar fund-raising plans, two of the people said.

Chinese President Xi Jinping in May pledged a US$124 billion (S$169 billion) funding boost to his plan to build a modern Silk Road, connecting China with new and old trading partners.

He also said China would encourage financial institutions to expand their overseas yuan fund businesses to the tune of 300 billion yuan.

Beijing is trying to contain overseas deals after some extravagant purchases in recent years, but while private spending on deals has slumped, acquisitions by Chinese companies in countries that are part of the Belt and Road initiative are soaring, totalling US$33 billion as of the middle of this month.

That compares with a US$31 billion tally for all of last year, data from Thomson Reuters showed.

The sources said CCB and BOC would raise US dollars for the offshore portion of their funds and yuan from onshore investors. Some of the onshore capital could be used offshore for Belt and Road deals overseas, two of the sources said.

REUTERS

A version of this article appeared in the print edition of The Straits Times on August 23, 2017, with the headline 'China banks 'raising billions' to fund Belt and Road push'. Print Edition | Subscribe