China Opens Up Capital Markets To Allow The Issuance Of OBOR Bonds

By Junjiewu99 (Own work) [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons

The expansion of the One Belt One Road (OBOR) initiative recently saw another significant development whereby China has opened up the Shanghai and Shenzhen stock exchanges to allow domestic and international companies to issue bonds to finance projects under the OBOR initiative.

The fact that the China Securities Regulatory Commission (CSRC) stated that government-backed institutions in countries along the OBOR can also issue bonds in China is a clear statement of intent to open up the Chinese markets for investment opportunities which will be mutually beneficial to all parties concerned in yet another example of a win-win situation.

Traditionally, within the remit of the OBOR initiative, projects have been financed by the likes of the Asia Infrastructure Investment Bank (AIIB), Silk Road Fund, China Development Bank and Export-Import Bank of China.

Seven companies have initially been granted approval by the CSRC to issue bonds worth a total of around 50 billion yuan (8 billion US dollars) through the aforementioned stock exchanges. Perhaps unsurprisingly one of those companies is the Russian aluminium producer UC Rusal, which issued the first officially approved corporate bonds worth 1 billion yuan on the Shanghai Stock Exchange. Furthermore, in early 2018, Chinese cement maker Hongshi Holding Group issued bonds worth 300 million yuan, utilised to purchase equipment for a cement plant in Laos.

Tellingly, Singapore-based Global Logistics Properties, which is a major warehouse operator recently received approval by the CSRC to issue up to 12 billion yuan (1.8 billion US dollars) worth of bonds to finance its recent acquisition of European logistics firm Gazeley, demonstrating how nations are seeking to take advantage of Chinese investment to further their own ambitions to develop across the entire OBOR region from Vladivostok in the east to Lisbon in the west.

The myopic western view that the OBOR initiative is all about Chinese expansionism and hegemony is quite simply not the case as, in a small part, the above examples illustrate. China will seek to encourage global companies to issue bonds in the Chinese capital markets and will work to finance projects across the entire OBOR initiative in mutually beneficial ways. This development is a further example of how China is seeking global integration and cooperation with respect to the OBOR initiative.

Nations such as the US and UK should take note of such developments simply because at some point they are going to have to either embrace the OBOR or sink into the abyss. It is also quite clear that the US and UK need to look to reindustrialise and the OBOR and Chinese capital markets could significantly assist in that respect.

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