Western banks eclipsed by China's along the new Silk Road

Wed May 17, 2017 8:37am EDT
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By Shu Zhang and Matthew Miller

BEIJING (Reuters) - For global banks, China's new "Silk Road" is a tantalising concept: billions of dollars in deals, loans and advisory fees, and a cozier relationship with Beijing for those who step up.

Dozens of senior international bankers turned up at the weekend for a Beijing summit to promote China's "Belt and Road" initiative, an ambitious plan to open new trade corridors across the globe using roads, power lines, ports and energy pipelines.

But commercial considerations, higher funding costs and compliance worries are holding Western lenders back, and some bankers say the situation is unlikely to change.

That leaves the bulk of the action with China's policy lenders and commercial banks, who are already bankrolling most key projects in some of Asia's most challenging environments.

"This is not something that will help you earn your bread and butter," said one Hong Kong-based banker, who said he turned down the opportunity to attend the Belt and Road Forum hosted by Chinese President Xi Jinping.

"Despite these hundreds of billions (of) dollars of investments being talked about, the fact of the matter is the share of business for foreign banks in China has actually gone down and this is not going to change that."

The Belt and Road initiative - into which China's policy banks have already pumped $200 billion - encompasses Asia, the Middle East and Africa, and is aimed at bolstering Beijing's global ambitions.

Asia's infrastructure needs do not stop at Belt and Road - the Asian Development Bank puts potential infrastructure investment needs in emerging Asia and the Pacific at over $26 trillion by 2030.   Continued...

FILE PHOTO: The logo on the building of HSBC's London headquarters appears through the early morning mist in London's Canary Wharf financial district, Britain March 28, 2017.    REUTERS/Russell Boyce/File Photo