The China-led Belt and Road initiative (BRI) is a development strategy announced by Chinese President Xi Jinping in 2013. It refers to the New Silk Road Economic Belt, which will link China with Europe through Central and Western Asia, and the 21st Century Maritime Silk Road, which will connect China with Southeast Asian countries, Africa and Europe. The UK has a long history of working with many economies on the Belt and Road, including Kazakhstan, and those in Central Asia, the Middle East and Africa.
Touching 65 countries, 64% of the world’s population and 29% of the world’s GDP, the BRI stands to transform global connectivity and trade, but still requires widespread international support and innovation to ensure it is a long-term success, particularly in relation to financing. The estimated financing gap in Asia of around $1.7 trillion per year until 2030- a total of £26 trillion- cannot be met through government and/or multilateral organisation funding alone, and will require private investment. The UK has been a strong advocate of the BRI since its announcement, and joined the Asia Infrastructure Investment Bank (AIIB) as a founding member.
London is the natural Western end of the BRI and can support the initiative as a hub for international infrastructure investment, and providing innovative financing products to ensure financial sustainability. Globally, nearly 8% of global infrastructure financing was generated through the UK in 2016- this amounted to over $18 billion in 72 deals, including more than $1.2 billion of lending to emerging markets. In 2016 the UK issued over $4 billion of global project finance bonds in 15 deals. The London Stock Exchange lists bonds from 1/3 of all BRI countries, and is home to equities from 8 BRI countries (source: LSE October 2017 data)
The City of London is committed to supporting BRI activity that promotes London as the world’s leading global financial centre. With our longstanding representative offices in China, we are in a unique position to support BRI activity at both ends of the map. We have participated in high-level events in the UK and China, including the Belt and Road Forum for International Cooperation hosted by President Xi Jinping in Beijing in May 2017, which the City of London the Rt. Hon. the Lord Mayor Alderman Charles Bowman spoke at, and the Special Adviser for Asia Sherry Madera attended.
Green finance is prudent, profitable and one of the best tools available in the race to cut carbon. China has embraced green finance and championed it domestically and internationally, particularly during its G20 presidency in 2016 when the People’s Bank of China produced recommendations on mobilising private capital for green investment, oversaw the G20 Green Finance Study Group co-chaired by PBoC and the Bank of England, and announced the ‘Guidelines for Establishing the Green Financial System’.
London recognises the important role of green finance for financial and environmental sustainability and has also established itself as a leader: the London Stock Exchange boasts the most comprehensive green bond offering of any global exchange in the world, with 48 green bonds that have raised in excess of $11bn in 7 different currencies.
In January 2016 the City of London established the Green Finance Initiative (GFI) in partnership with government to bring together international expertise from across the financial and professional services sector to provide public and market leadership on green finance, advocate for specific regulatory and policy proposals that might enhance the green finance sector worldwide, and promote London and the UK as a leading global green finance sector.
In May 2017 the GFI established a taskforce in partnership with the Green Finance Committee (GFC) of China Society for Finance and Banking, bringing leadership from China and the UK together to resolve challenges such as a lack of policy signals, risk analysis and innovative products.
In early September 2017 the UK-China Green Finance Joint Task force launched its interim report Turning Green Momentum into Actions comprising 5 chapters, including the chapter ‘Greening the Belt and Road’, which was co-chaired the City’s Special Adviser for Asia, Sherry Madera, and Professor Lan Hong, Renmin University of China. A critical issue for financing Green Belt and Road infrastructure projects is crowding in private capital, and ensuring consistent ‘green’ standards throughout different projects and jurisdictions. A key recommendation from this was the establishment of a Greening the Belt and Road Investor Alliance to look at these very issues.
RMB internationalisation has long been on the agenda in London, and began in earnest when the RMB Initiative was launched in 2012 by the then Chancellor George Osborne - the purpose being to establish London as a major offshore centre for RMB. The final report produced as an output of the initiative revealed that London’s RMB FX market had grown 143%. The initiative was agreed to have met its objectives in 2015.
Thanks to the efforts of this initiative, London is now the largest offshore centre for RMB outside of Greater China, a statement confirmed by SWIFT (也有中文版).
The City of London is continuing discussions with industry players, central banks and regulators on next steps for RMB internationalisation. We expect that the Belt and Road Initiative and two way flows visa bond connects are excellent opportunities to support the next phased of internationalisation of the RMB.