Fund launched for Chinese firms along Belt, Road

Up to 30 billion yuan ($4.43 billion) will be injected into China's "Belt and Road" (B&R) initiative by mid-2017, Li Yu, president of Beijing-based think tank International Ocean Forum, announced in Hong Kong on Saturday.

Li's announcement came during the inauguration of the China Ocean Strategic Industry Investment Fund (COSIIF), which is designed to explore investment opportunities and offer financial services to Chinese enterprises in foreign markets, especially along the "Road," short for the 21st Century Maritime Silk Road.

COSSIIF was launched by Hong Kong-based Golden Grain Capital Management Limited under the auspices of the International Ocean Forum. Its major partners include the Dubai-based Elyseum Capital Partners.

The B&R initiative was proposed by China's top leadership in 2013. The World Bank has estimated that the new framework will cover 65 countries, two-thirds of the world population and invigorate $2.5 trillion worth of international business activities. The initiative has led China to expand investment in financial sectors. In 2014, China established the Silk Road Fund, which has raised $10 billion so far. A year later, China set up the Asian Infrastructure Investment Bank (AIIB), which launched in 57 countries with an initial capital of $100 billion.

However, the emergence of the two new financial institutions, along with traditional organizations such as the Asian Development Bank and the World Bank, is still far from meeting the enormous demand for investment along the B&R routes. It is expected that by 2020, $800 billion will be needed solely for infrastructure projects in Asian countries.

Unlike these "State-owned" or "government-led" financial institutions, the newly-built COSSIIF represents a new trend for raising capital for mega projects, Li said. Headquartered in Hong Kong, COSSIIF has "a broad international perspective and can be more efficient in implementation." In addition, the fund has introduced Islamic finance, which has a treasure chest of money, into its financial pool, a bold move that can "diversify the sources of funding and more tightly integrate Hong Kong and Dubai, the two major financial hubs in Asia," said Li.

Rick Pudner - former CEO of Emirates NBD, the largest bank in the Middle East for six years, and current president of Elyseum Capital Partners - said Hong Kong and Dubai "mirror one another in terms of capabilities and access to the Belt and Road." He added that the synergies between the two areas in terms of opening up and the ability to tap into different financial resources gives them advantages when it comes to major projects in Africa and the Middle East.

In order to balance its roles as a profit-seeking financial institution and a promoter of the B&R initiative, COSSIIF Chairman Jin Kun said the fund will divide its business strategies into two parts. The first part will focus on assembling private equity funds by investing in businesses with potential, while the second part will focus on helping countries located along the routes of the B&R initiative with infrastructure projects. Jin said the arrangement will "better serve this grand national program while aligning with the fund's aim to develop and prosper and benefit our partners and clients."

Jin also said that the fund can provide a role model for China's overseas investments by locating sufficient investment opportunities and providing down-to-earth suggestions for Chinese companies in overseas markets.

"We can help these enterprises in a more rational, healthy and professional way to enlighten them on the rules of international financial sectors so as to avoid haphazard investment," Jin said.

"We don't invest just to invest, we must choose projects that are in line with our investment principles - a rational return on investment and a sustainable investment portfolio."

Jin also expressed the hope that China's successful experience in boosting and maintaining extraordinary economic growth could be shared with other countries along the B&R routes through the fund.

"The B&R is not a Chinese version of the Marshall Plan because it has no political strings attached," Jin said, explaining that the initiative can export China's excessive capacity to where it is mostly needed and help these countries optimize their economic structures.

"The only political expectation for the initiative," said Jin, "is that it can change other countries' views about China, who is a friend instead of a threat."