A batch of flagship programs have come out since China's Belt and Road Initiative was raised in over two years ago, and more of them are now urged to debut to satisfy potential investment demand.
Karot hydropower station project, the first one invested by Silk Road Fund and with China Three Gorges Corporation as the contractor, started construction on January 10 this year, according to a report of People's Daily last week.
Under the Belt and Road Initiative, programs alike such as ones on transportation, communication and energy infrastructure inter-linkage are an important part of cooperation between China and countries along the Belt and Road. But as these projects usually involve huge amounts of investment, participation and investment by businesses shall be gradually guided after government-backed investment in the early stage.
If some flagship " Belt and Road" programs were demonstrated this year, market investors' participation in these programs would be greatly boosted, said Ivan Chung, senior vice president for Greater China credit analysis of Moody's Investors Service.
Besides, Chung estimated that financing demand by businesses eager to take part in "Belt and Road"-related infrastructure programs was sizeable and on back of the sluggish global economy which drove banks, in particular in Europe and the U.S., into reluctant lending, bond financing would be a better choice for businesses.
For instance, bond financing to the above-mentioned infrastructure programs can match with insurers' goal of capital using as they usually prefer investment targets that can generate long-term and stable returns. But these bonds are expected to have certain conditions such as low risk and clear prospect for steady returns to attract investors, noted Chung.
However, there is so far no example of market funds' participation in "Belt and Road"-related infrastructure programs and the main investment body for these projects are still governments and policy banks in countries along the "Belt and Road".
The reason to the problem was that these programs were risky in the early stage and there was also no risk control mechanism and financial structure for investors to fend off risks, not to mention their unforeseeable investment returns, according to Chung.
As he suggested, a general practice in the world was that it was better for financial institutions such as World Bank and Asian Development Bank (ADB) to provide some capital to support these programs in the early stage.
Another general practice was that for such projects, ADB sets ceiling of excess investment for these projects and its involvement meant better influences, supervision and risk control, which would boost investors' confidence.
As he believed, the newly-established Asian Infrastructure Investment Bank (AIIB) could start investing in "Belt and Road"-related infrastructure projects now and it was better for various parties to explore a way to allow market fund to take part in the "Belt and Road" construction.
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