The chief of China’s central bank said that the mammoth One Belt One Road initiative will play a key role in spurring the growth and maturation of the country’s capital markets, as well as the expansion of financial institutions abroad and internationalization of the RMB.
Speaking at the One Belt One Road Summit in Beijing over the weekend, Zhou Xiaochuan, the head of the People’s Bank of China, said that it wished for “further promotion of the development of capital markets such as the stock and bond markets, and expansion of the interconnectivity between the equity and bond finance markets.”
Zhou pointed to the One Belt One Road initiatives as a key means for accelerating the development and liberalisation of China’s financial markets.
“The establishment of One Belt One Road is defined by characteristics such as lengthier recovery periods and huge capital demand,” said Zhou. “Liberalised finance can play an important role in this.”
In Zhou’s estimation the initiative will play a critical role in spurring the expansion of Chinese financial institutions into overseas markets, pointing to positive trials of financial cooperation between the commercial banks of One Belt One Road countries.
“Not only will [One Belt One Road’ need financial cooperation, it will also involve large volumes of auxiliary financial services including agency bank relationships, bank syndicate loans, capital settlement and clearance, project loans, account management, risk management, etc.
“Irrespective of whether its expediting trade connections or better servicing foreign investment, this will all require hastening of the networked configuration of financial institutions and financial services, improving financial services for trade, in order to form a positive financial and economic cycle that is mutually reinforcing…
“China is willing to strengthen interaction and cooperation with the financial regulators of all countries to jointly remove various irrational barriers and curbs on entry and provide an open, fair and orderly regulatory environment.”
Zhou points out that the development of basic infrastructure to support cross-border financial operations between One Belt One Road participating states has already kicked off.
“Connections between the financial infrastructure of One Belt One Road countries will help ensure the high-efficiency operation and overall stability of financial markets,” he said.
“Over recent years China has made some advances in this respect, for example China UnionPay’s cross-border payment network has already spread to 160 countries and regions, including numerous One Belt One Road countries, to provide high-quality, safe and highly effective payment services for their enterprises and residents.”
Zhou further pointed to the role that One Belt One Road may play in spurring the use of the Chinese yuan in overseas jurisdictions, a topic he recently addressed at length in an essay published on PBOC’s official website.
According to Zhou increased use of the Chinese yuan will help to effectively mobilise local savings and reduce exchange costs, as well as maintain financial stability.
Zhou notes that One Belt One Road already has prior experience and precedents for promoting overseas use of the Renminbi, including the execution of currency swap agreements by China since the Great Financial Crisis, and ongoing trials with the Cross-border Inter-Bank Payments System (CIPS).