Background
Over the past years, China has become one of the most important sources of infrastructure funding in the developing world through its Belt and Road Initiative (BRI). Yet, it is still far from closing the infrastructure financing gap, especially in the aftermath of the COVID-19 pandemic. Therefore, it is paramount to deepen international cooperation between relevant stakeholders, including private investors, in infrastructure financing.
In this context, IIGF Green BRI Center was commissioned by the British Embassy Beijing to work on a handbook for Chinese companies (including state-owned enterprises and private companies) to apply project finance in overseas infrastructure projects, especially in emerging markets. It particularly aims to facilitate cooperation between Chinese companies, Chinese and international financial institutions in third markets. The handbook is based on desk research, expert interviews, focus groups and an in-depth comparison between current Chinese and international infrastructure finance practices across the project pipeline.
Built on many existing publications on project financing, this handbook focuses particularly on the “gaps” between international and Chinese practices when financing infrastructure projects in emerging markets and how these gaps can be closed to accelerate international co-financing.
Launched during the IIGF Annual Conference 2021, the Financing Mechanism Handbook was co-authored by Dr. Christoph Nedopil Wang, Ms. YUE Mengdi, Ms. TANG Yingzhi and Dr. YUE Yang.
The launch ceremony and roundtable discussion
The launch ceremony was held together with a roundtable discussion gathering experts from infrastructure project sponsors, financial institutions and academia. The roundtable began with welcoming and opening remarks by Mr. Tom Duke, Deputy HM Trade Commissioner for China, and Ms. WANG Yao, Director General of IIGF. They both emphasized the need to develop infrastructure projects that are sustainable and bankable, tapping into international finance and capital. It followed by the presentations on the ESG Handbook by Mr. SHI Yichen, Deputy Director of IIGF and Director General of IGI, and on the Financing Mechanism Handbook by Ms. YUE Mengdi, researcher of IIGF.
In the next session, 8 representatives from government agenc(ies), project sponsors, financial institutions and academia were invited for a roundtable discussion. They are, Mr. ZHAO Huaiyong, Deputy Director of the Department of Finance, Banking and Credit construction of National Development and Reform Commission; Ms, ZHANG Xiang, the Secretary General of China International Contractors Association; Ms. LI Yijun, the Director of Research Division III of National Development Bank Research Institute; Mr. SI Yuanzhong, the Deutsche Börse Group Beijing Representative Office; Ms, GAO Qin, the Deputy Director of International Cooperation Department of International Business Department in ICBC; Mr. JIN Wenshuo, the General Manager of Shandong High Speed Nile Investment and Development Co.; Mr. Julian Vella, the Co-Head of KPMG’s Global Infrastructure Programme; Mr. Christoph Nedopil Wang, the associate professor of the department of Economics of the Fanhai International School of Finance of Fudan University. They expressed their views of the evolvement in financing mechanisms for Chinese companies working on the infrastructure projects in third-party markets and the impacts of ESG standards on international financing mechanisms and risk mitigation for overseas infrastructure projects.
Summary and Outlook
Participants showed great interests in learning more about how to promote tripartite cooperation in infrastructure financing and embed ESG standards throughout the process. The release of the China Third-Party Market Cooperation for Infrastructure Projects: Financing Mechanism Handbook will not only provide Chinese companies with guidance on the whole project financing process, but also help them understand the gaps and potentials of international co-financing mechanisms for the development of infrastructure projects. It is hopeful that international co-financing with aligned ESG requirements will help bridge the global infrastructure financing gaps and drive its development into a sustainable direction.