Infrastructure Financing Centre for the Belt and Road
This year marks the 10th Anniversary of the Belt and Road Initiative (B&RI). After a decade of ongoing development, the B&RI has become an international co-operation platform that is open, inclusive, mutually beneficial, and promotes win-win collaboration. The HKSAR Government will orgainse a two-day Belt and Road Summit jointly with the Hong Kong Trade Development Council on Wednesday and Thursday. The event is expected to welcome thousands of local, Mainland and overseas political and business leaders, businessmen and heads of non-government organisations, who will together reflect on the experience and achievements in the past ten years; and discuss how to promote high-quality development along the Belt and Road, and how Hong Kong could make greater contributions in the future. This year, a new Middle East Forum will be featured in the Summit to explore new opportunities for development and co-operation in the region, highlighting our interest in and importance attached to the Middle East market.
Under the B&RI, a good number of infrastructure projects including railways, highways, ports, electricity facilities and industrial zones have been implemented in countries across Southeast Asia, Central Asia, the Middle East and Africa. They are promoting the growth and development of the local economy. With the recent commissioning of the Jakarta-Bandung High Speed Railway in Indonesia, which is the first high speed railway in Southeast Asia, travelling time between Jakarta and Bandung has been significantly reduced from three and a half hours to 40 minutes. This will enhance people flows substantially, and speed up the economic and societal development.
During the past decade, the average annual trade volume between China and the Belt and Road countries has doubled from US$1 trillion in 2013 to US$2 trillion last year, representing a growth of 8% per annum on average. China’s outward direct investment in the Belt and Road countries last year amounted to nearly US$21 billion, representing a year-on-year increase of 3.3%.
The Belt and Road initiative is bringing enormous infrastructure investments and financing activities to the market, thereby expediting the implementation of projects. Under the “One Country, Two Systems” principle, Hong Kong is our country’s international financial centre, bringing together domestic and foreign capital as well as top-class financial institutions and talents, and offering diverse and abundant financing channels. With rules and regulations widely trusted by international investors, Hong Kong can make unique contributions to this end.
In terms of financing infrastructure projects, in addition to traditional equity investments, syndicated loans, and bond issuance, investors may also choose to list mature projects in Hong Kong, or securitise investment interests so as to early recoup funds for deployment in other projects. In last year's Budget, I proposed a pilot scheme on infrastructure financing securitisation to be launched by the Hong Kong Mortgage Corporation Limited (HKMC). In May this year, HKMC successfully issued the first infrastructure financing securitisation product through a special-purpose company called Bauhinia 1. The total value of the Bauhinia 1 portfolio is in the order of about US$ 400 million, including infrastructure loans for 25 projects across 12 countries and involving 9 sectors. It also includes US$100 million in sustainable financing notes, invested in renewable energy projects that contribute to an annual reduction of over 260,000 metric tons of carbon emissions. The education and telecommunications-related projects covered by Bauhinia 1 also assist the respective countries in providing more opportunities for higher education to their underprivileged communities and improving communication infrastructure.
With the increasing use of Renminbi (RMB) by Belt and Road countries for cross-border trade settlements, the demand for RMB investment is rising. Hong Kong has the world’s largest offshore pool of RMB funds, processes three-quarters of global offshore RMB payments and has the largest offshore RMB bond market. We are committed to expanding the range of offshore RMB investment products and channels, as well as risk management tools, to better meet the needs of investors in fund allocation and risk management.
Hong Kong also possesses huge advantages in providing the necessary professional services in engineering, construction, financial consultancy, accounting and legal services to infrastructure projects in the Belt and Road countries. Among which, our reliable dispute resolution services play a vital role in boosting confidence of parties concerned in taking forward cooperation.
Under the “One Country, Two Systems” principle, Hong Kong is the only common law jurisdiction in China. With the firm support of the National 14th Five Year Plan and the GBA Outline Development Plan, HKSARG is fully consolidating Hong Kong’s position as a centre for international legal and dispute resolution services in the Asia-Pacific region. The AALCO (Asian‑African Legal Consultative Organization) Hong Kong Regional Arbitration Centre was established in Hong Kong in May last year. With the support of the Ministry of Foreign Affairs, the International Organization for Mediation Preparatory Office was officially opened in Hong Kong in February 2023.
Looking ahead, there will be a greater number of green infrastructure projects along the Belt and Road. According to market estimates, the Asia region alone will require US$66 trillion in climate investments in the next 30 years. Seeing the global trend in this area, I have set out clearly in this year’s Budget our determination to develop Hong Kong into an international centre for green technology and green finance. Hong Kong’s green finance market is leading in Asia, with green and sustainable bonds arranged in Hong Kong accounting for over one-third of the Asian market.
Green technology enterprises grown in Hong Kong have cutting edges in scientific research. For example, a local start-up has developed a cooling coating which, when applied to building surfaces, could lower indoor temperatures by 6 to 8 degrees, reducing 40% of electricity consumption. Moreover, a local start-up has developed the world’s first artificial coral reef tile structure made by terracotta clay using 3D printing technology, which is being deployed in the sea to help corals grow. These enterprises have already established a presence in the Middle East market. Building on the cooperation among Hong Kong and our sister cities in the Greater Bay Area, we can provide the needed financial and technological solutions to help Belt and Road countries undergo green transformation.
A decade of co-operation has brought shared development and common prosperity. According to the World Bank’s report, the B&RI had increased trade flows among participating economies by 4.1%, attracted 5% more of foreign investment, and levelled up the gross domestic product (GDP) of low-income countries by 3.4%. Benefiting from the B&RI, the GDP percentage share of emerging and developing economies in the world had increased by 3.6%. All these figures are testament to the pivotal role played by the B&RI in facilitating and deepening international co-operation, promoting global connectivity, and driving world economic growth. Hong Kong has consistently been an active participant in and contributor to this global co-operation platform. As we deepen collaboration with our trading partners, Hong Kong will fully leverage its distinctive advantages in the high-quality development along the Belt and Road. With more prosperous development and greater friendship, we can tap into more business opportunities and create brighter prospects together.
September 10, 2023