1. Analysis of Investment and Financing Models for Belt and Road Projects

In analyzing the financial service system for Belt and Road projects, we must first identify the roles of financial institutions and markets. Currently, mainstream investment and financing models for Belt and Road projects include indirect debt financing; engineering, procurement and construction (EPC); direct debt financing and equity financing.

1.1 Indirect Debt Financing: The Most Common Model of Infrastructure Investment and Financing

Syndicated loans offer advantages as follows: First, multiple banks jointly provide lending support to infrastructure projects under the coordination of a leading bank. Participation of local financial institutions is conducive to mitigating investment risks. Moreover, as a result of shared risks, no individual banks will be exposed to excessive losses from investment, financing risks or other risks.

Moreover, China’s domestic or cross-border syndicated loans also have the following features: First, steady growth in syndicated loans with relatively high asset quality. In the first half of 2017, the balance of syndicated loans in China amounted to 6.13 trillion yuan, which doubled over the level of six years ago, with an average non-performing loan (NPL) ratio of 0.53%. Another feature is the dominant role of developmental financial institutions and large banks. Policy banks and major commercial banks account for a significant share of syndicated loans. Their business coverage has extended beyond domestic business into overseas business. Integrated financial services have replaced traditional credit financing as a business priority. Cross-border syndicated loans play a more vibrant role in facilitating China’s outbound investments, attracting foreign investments, and serving the Belt and Road Initiative.

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