December 12, 2020
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China’s policy lending in Eurasian Belt and Road economies is facing a raft of debt relief requests and a slowdown in bilateral government-to-government loans. However data analytics that focus solely on policy bank lending through bilateral agreements miss the wider geoeconomic picture. China’s policy banking environment in Central Asia is shifting, but the loan books of the future will be more heavily weighted to Chinese enterprises operating in host economies and host economy state-owned enterprises (SOEs).
The financial model underpinning Belt and Road investment is a combination of public finance vehicles, all essentially drawing on China’s sovereign wealth currency reserves. The most common pattern is “three banks, one insurer” comprising the joint operations of the Export-Import Bank of China, China Development Bank, Industrial & Commercial Bank of China, and Sinosure. Other commercial banks are also incentivized to participate in the Belt and Road public finance model with access to China’s foreign currency reserves and with overseas operational risks underwritten by Sinosure.