China pledges to add $14.5bn to Silk Road Fund

The Chinese government will provide additional funding of $64bn to developing countries covered by the ‘Belt and Road’ initiative through development banks and other channels.

China has decided to inject an additional 100 billion yuan ($14.5 billion; €13.2 billion) into the Silk Road Fund to help meet enormous funding demand from the region covered by the “One Belt, One Road” initiative.

Chinese President Xi Jinping announced the capital boost yesterday during the opening address of the Belt and Road forum in Beijing. He also pledged a combined 380 billion yuan in new lending through the China Development Bank and the Export-Import Bank of China, as well as 60 billion yuan in the coming three years to countries and international organisations that join the initiative. 

The Silk Road Fund was founded with $40 billion capital supplied by China’s foreign reserves, China Investment Corporation, the CDB and the EXIM Bank of China. It is one of China’s two major vehicles, other than the Asian Infrastructure Investment Bank, to fund infrastructure projects in countries along the historical silk roads across Eurasia. 

“The fund has a large reserve of projects in waiting and the demand for funds will be greater in the future,” Yi Gang, deputy governor of the People’s Bank of China, told the government’s press agency Xinhua

The Silk Road Fund has made $6 billion of investment commitments since its creation in February 2014. The vehicle’s portfolio includes PJSC SIBUR, a Russian gas processing and petrochemical company, and Dubai’s 2.4GW Hassyan clean-coal power project. 

The OBOR initiative was proposed by President Xi in 2013 as a master plan to build infrastructure linking mainland China to its Eurasian neighbours. About 62 countries are covered by the programme, for which a total investment of up to $502 billion would be injected over the next five years, according to Shen Hu, a Hong Kong-based analyst of Credit Suisse. 

“The US withdrawal from the Trans-Pacific Partnership earlier this year implies that China will assume a much bigger regional role. President Xi Jinping’s strategic Belt and Road initiative, a modern adaptation of the historical Silk Road, is enabling China to export its overcapacity and relieve downward pressure on the economy by fostering closer trade collaboration with participating nations,” said Alexious Lee, head of China research at Hong Kong-based brokerage CLSA.