China Shaping Its Residents’ Foreign Investment to Belt and Road

China’s financial authorities are clearly combining their restrictions on the country’s citizens’ foreign investments in speculations abroad, with specific channels to direct them into physical economic progress through the Belt and Road Initiative. This process has been discussed by Chinese economists since the launching of the AIIB and Belt and Road, as the necessary orderly way to direct some of China’s $9 trillion in savings abroad, under relaxation of capital controls, without large capital flight that would disrupt the international financial system.

The South China Morning Post on Aug. 16, and Reuters on Aug. 22, reported that the “big four” public commercial banks in China have begun raising special funds from Chinese citizens and companies, for Belt and Road investments abroad. China Construction Bank is raising a $15 billion fund; Bank of China a $3 billion fund. This is “part of a broader central bank push to invest yuan overseas.” Behind some false claims in this article, the reality is clearly that the People’s Bank of China is curbing investment overseas in gambling, real estate, sports and entertainment ventures, etc.; and encouraging overseas investment in BRI. The big four commercial banks are forming the means to do this. PBOC has reportedly asked the banks to target a goal of 300 billion yuan (ca. $50 billion) in BRI funds. This will also increase use of yuan in global trade.

Thompson Reuters data showed that Belt and Road country investment in projects from China was $33 billion in 2017 through July, going at a $60 billion annual rate, compared to $31 billion in 2016 overall. This does not include commitments, but invested funds.

These new funds are also open to American or other foreign investors and corporations.