A Banker's View of the 'Belt and Road' Initiative
The "Belt and Road" program，which seeks to expand trade and investment between China and several dozen countries that are currently in need of infrastructure development，has been seen as a major strategic initiative. In an interview，China Forex，with Zhou Mubing，chairman of the Agricultural Bank of China，discusses the program from the perspective of the financing opportunities likely to be created.
China Forex: It is now some three years since the "Belt and Road" initiative was first proposed. In your view what achievements have been made under this program? What benefits have the people of the countries involved seen and what would you say is the general assessment from the international community?
Zhou Mubing: The "Belt and Road" initiative was first proposed by China but it is not solely a Chinese initiative. It is a common effort involving and benefiting many countries. The initiative presents concrete measures rather than empty slogans. The "Belt and Road" initiative was started from scratch and it has developed in a steady fashion. Progress has been better than expected. Various government ministries have issued detailed statements on the program so there is no need for me to go over the same ground. But I will address three areas based on my own experience:
First，the "Belt and Road" initiative has been gaining attention from the international community. My work has taken me abroad in recent years for work，and during these travels I have had numerous discussions with government officials，regulators and executives of international financial institutions. They have generally had high praise for the initiative and have expressed considerable interest in the program. They have also expressed hope that their domestic companies or banks could have opportunities to participate.
Second，the financing business related to the countries participating in the "Belt and Road" initiative has grown rapidly. Loans for infrastructure projects，trade finance，and cross-border mergers and acquisitions are growing rapidly，and this demonstrates the progress of this important initiative. In 2016，the Agricultural Bank of China provided US$350 million in infrastructure project loans，US$2.673 billion in trade financing，US$93.2 million of cross-border merger and acquisition financing. It also handled US$71.147 billion in international settlements，and business in each of these areas has been rising sharply.
Third，China's manufacturing sector is attractive in both price and quality. This has allowed China to help improve the standard of living of the people in the countries participating in the initiative. I would say that the improvements in infrastructure are the area where the greatest advances have been made. This may take some time to become apparent，however.
China Forex: What opportunities have the "Belt and Road" initiative brought to the Agricultural Bank of China? What future business potential do you see?
Zhou Mubing: As I mentioned earlier，the "Belt and Road" initiative has a huge requirement for financial services. For commercial banks，there are three main kinds of development opportunities. First，the rapid growth of cross-border trade creates opportunities for the banking business. The initiative promotes the rapid growth of trade between China and other participating countries and that drives demand for trade and financial products and services for enterprises，such as for more convenient trade settlement services，trade financing and hedging.
Second，there is huge demand for capital to support infrastructure construction. The International Monetary Fund estimates that over the next five years，investment in infrastructure construction will exceed US$3 trillion. The infrastructure investments will be made in countries that lack capital so that means there will be a need for large amounts of financial support from external sources.
Third，there is the potential for expanded cross-border use of renminbi financing. Cross-border use of the renminbi has been growing and there is greater acceptance of the currency in the countries participating in the initiative. This means there will be increased demand for renminbi financial products.
As one of the big state-owned banks，the Agricultural Bank of China will always support the national strategy of encouraging Chinese companies to "go global." It is taking the "Belt and Road" Initiative as its own responsibility and actively promoting international financial services. In this effort it expanded its own branch network to include the countries participating in this program. At present，ABC has set up a total of five institutions in these countries，namely in Singapore，Russia，and Vietnam as well as two branches in the United Arab Emirates (the Dubai International Finance Center branch and the Dubai branch). It also helped promote the "go global" drive by local businesses. In 2016，ABC provided business services for more than 200 customers，including export credit，cross-border merger and acquisition credits，syndicated loans，foreign bond related services and other such business under the "Belt and Road" initiative. This covered 35 countries and the projects included Harbin International's Dubai clean coal power plant project，Huaneng Power's Ruyi Pakistan coal-fired power station，the Malaysia-China Guan Dan Industrial Park joint steel plant in the Guangxi Beibu Gulf port and other major construction projects.
ABC also has helped boost rural areas under the national food security strategy by the use of integrated financial services to support the agricultural sector's efforts to "go global." In recent years，ABC has provided strong support to China National Cereals，Oils and Foodstuffs Corporation (a state-owned food processing holding company better known as COFCO Group) and New Hope Group (a major agricultural conglomerate) and other leaders in the farm sector in their development of a global industrial chain and a trading network. Moreover，the bank has achieved fruitful results in cross-border renminbi business development by promoting cross-border renminbi innovation under the capital account. It was designated as the renminbi settlement bank for the UAE.
In the near future，ABC will continue to keep pace with national goals by paying close attention to the development trends of the "Belt and Road" initiative. It will actively promote the institutional framework of the program and provide better cross-border financial services while expanding the scope of business development.
China Forex: The investment process of the "Belt and Road" initiative faces risks and challenges. How does the bank plan to address them?
Zhou Mubing: Indeed，in providing services to the relative national projects under the initiative，ABC is deeply aware of the fact that financial risks are significantly higher than on domestic projects due to geopolitical complexities，religious and cultural issues as well as legal and regulatory differences in these countries. Therefore，ABC has paid greater attention to risk prevention and taken targeted actions in this area.
It has strengthened cross-border business risk management，for example. There are stricter requirements for new customers，including clearly defined criteria on customer credit ratings and specific requirements on how long a borrower has been in business. It has selected customers with a good track record in international business. As far as the domestic customers trying to "go global," the bank has implemented a unified credit management system to control risk exposure. It has strengthened links between domestic and foreign branches and promoted information sharing regarding domestic and foreign institutions regarding business conditions，financing purposes，business contacts and fund transfers. This has allowed the bank to issue timely warnings on potential problems and adopt measures to prevent and reduce risk.
It has also improved the country's risk management system by establishing a national risk internal rating system which makes use of centralized assessments. It has strengthened the management of quotas on loans to each participating country. It has also implemented special risk quota examinations for countries where key projects face greater risks. Moreover，it has strengthened daily monitoring of country risks so that it can make timely adjustments to risk control measures.
It has also beefed up its law-compliance risk management. Given the differences in laws and regulations as well as policies and cultural traditions，ABC has paid particular attention to compliance issues to ensure that contracts are enforceable.
China Forex: With the implementation of the "Belt and Road" initiative，the demand for financing has been increasing. However，financing remains a problem as it is often difficult to obtain funds at reasonable borrowing rates，particularly for private companies. What can ABC do to resolve this problem?
Zhou Mubing: Indeed，the cost of financing and the inability of too many companies to obtain credit is a formidable problem that has attracted the attention of the state and ABC. Last year，ABC set up a special task force and a research team to address the issue. I personally organized research on this issue and the results have been submitted to relevant state departments. The basic conclusion was that financing was often hard to obtain or was too costly. However，the situation varied considerably from region to region as well as from industry to industry and company to company. Relatively speaking，the problem is most obvious in industries where there is overcapacity and technology levels are low. These are areas where the economy has had greater difficulties. Small and medium sized enterprises，notably private companies and start-ups，have also e