To meet the financing needs of countries along the Belt and Road route, a standardized asset class dubbed as the “Silk Road Bond” has been proposed by the Dagong Global Credit Rating.
Proposed by China in 2013, the Belt and Road route refers to the Silk Road Economic Belt that links China with Europe through Central and Western Asia by inland routes, and the 21st Century Maritime Silk Road connecting China with other Asian countries, Africa and Europe by sea routes.
Guan Jianzhong, Chairman of Dagong, envisions the SRB as “a new standardized asset class which has broad appeal to both issuers and investors in the international markets, and which can be scaled up to provide the volume of financing that can really make a difference."
The opportunities of the Belt and Road markets are immense and the ability for these countries involved, especially for those with less developed financial markets, to raise foreign funds to finance their infrastructure projects and domestic consumptions is vital to the success of the "Belt and Road" economy growth.
In is welcome remarks at the recent ”Belt and Road Summit -- Financing Through Silk Road Bond,” event organized by the International Capital Market Association and Dagong Global Credit Rating, Martin Scheck, Chief Executive of ICMA, said the Summit aims "to bring prosperity to the many developing Asian countries along the route that lack the capacity to undertaking major infrastructure projects on their own."
Guan Jianzhong, Chairman of Dagong, pointed out that "the Summit aims to discover a fundamental structure which can spur the economic growth of the Belt and Road countries."
"What we need today is to build a shared vision of growth and stability to avoid the next global collapse and ensure lasting conditions of prosperity" said Dominique de Villepin, the former Prime Minister of France.
Antony Leung, former Financial Secretary of Hong Kong S.A.R., Group Chairman & Chief Executive Officer, of Nan Fung Group pointed out that "Hong Kong, with its established capital market, can be a catalyst to this very innovative Belt and Road initiative."
Government support and policy development are identified to be most important features of SRB. Shaukat Aziz, former Prime Minister of Pakistan, pointed out "policy development of infrastructure financing by the governance of the Belt and Road countries is of optimal importance for economic growth of the Belt and Road markets."
Following the Summit, ICMA intends to work with key stakeholders including major Chinese and international banks, law firms, audit firm, and credit rating agencies, to assess the feasibility of developing Silk Road Bonds.
The main areas of focus are expected to be:
- Engagement with the stakeholders whose support is critical to the success of the initiative including, the Chinese authorities, authorities of other belt road countries, multilateral development banks and investors
- Agreement of a set of principles for the issuance of Silk Road Bonds
- Assessment of the risk appetite amongst investors for this asset class