Tonga, Argentina and Madagascar join the AIIB
Tonga, Argentina and Madagascar have officially become members of the AIIB. In addition to increased membership, the AIIB has done well in meeting its initial goals of building a quality talent pool and developing a good management system. However, the President of AIIB has called on the AIIB to incorporate international best practices into their standards.
More on the AIIB…
Banks may now officially apply a zero risk weighting to claims on the AIIB. This will allow issuers to get the tightest pricing possible when making agreements on sovereign bonds. Read more here.
The President of the World Bank, Kim Yong expressed that he sees no competition between the World Bank and the AIIB. He pointed out that the purpose and concept of One Belt One Road is in accordance with the World Bank and other international financial institutions. Cooperation between the two banks is complementary and they have close relations. Read more here.
The AIIB, IFC, and World Bank will co-finance a new solar energy project in Egypt. ACCIONA Energy will build three solar fields with the help of the Saudi company Swicorp. Construction on the project will start in December 2018. The energy produced will avoid emitting 297,000 tons of CO2. Read more here.
The AIIB is investing a 297.6 million USD loan towards overhauling the Belgrade-Stara Pazova section of the railway connecting Serbia's capital to Budapest, Hungary. Read more here.
AIIB Vice President, Joachim von Amsberg, says there is high possibility that the bank will invest in Malaysia, especially in solar energy development programs. Amsberg also claimed that despite Western skepticism, the AIIB has proven its ability to meet infrastructural development demand while cooperating with other multi-lateral institutions. Read more here.
ADB investments and partnerships...
ADB is granting 225,000 USD through the ADB Technical Assistance Special Fund to Timor-Leste for development in the country's coffee industry, with a special focus on youth. Coffee is the country's largest non-oil export, but lack of coordination and investment has lead to industry losses. To attract youth, the project is supporting a reality TV show, “Back to the Farm”. It will show young baristas and coffee farmer teams, publicizing new quality initiatives for coffee. The show will end in the 2017 Festival Kafe Timor annual coffee celebration where ADB is supporting an "Origin Tour" where foreign coffee buyers can be introduced to the Timor market. Read more here.
The newly appointed Mongolian Finance Minister Khurelbaatar Chimed met with ADB Country Director in Mongolia Yolanda Fernandez Lommen to introduce Mongolia’s and the ADB's new Country Partnership Strategy 2017-2020 (CPS). The CPS contains 1.2 billion USD in support over the next four years for economic and social stability, infrastructure for economic diversification and environmental sustainability. It is mentioned that the ADB coordinated with the IMF and World Bank to create the plan. Read more here.
The ADB pledged 5.225 million USD to rebuild Marawi after the end of the five-month conflict with ISIL-affiliated forces. Other multilateral organizations, including the World Bank, have pledged to help rebuild Marawi and the ADB is one of the lead foreign donors. China and other regional nations have the critical skills in reconstructing war-torn regions that the Philippines desperately needs.
The ADB hopes that its financial contributions and experience in disaster and conflict recovery will prove a boon for Marawi and its people, to strengthen ties between China and the Philippines. There is also hope for increased investor and private sector confidence as conflict will no longer be a barrier to business. Read more here and here.
The ADB will help Sri Lanka prepare an electronic ticketing system in the railways to streamline public transportation and ease traffic congestion. Read more here.
The ADB recently signed a deal with the Saudi Investment Bank in Egypt to support small projects that improve work opportunities in Egypt. The move is seen as part of a larger trend in the developing relations between Egypt and China, and part of China's larger One Belt One Road Initiative. Read more here.
Meanwhile, representatives from the Bank of Egypt and the ADB will negotiate a 500 million USD deal to meet the needs of Chinese companies operating in the region. They hope to diversify the financing options for companies operating with Chinese partners. This encompasses transport and electricity infrastructure projects as well as smaller projects aimed at addressing unemployment. Read more here.
The ADB will lend 150 million USD over 15 years to Shanxi state government for an energy-saving and emission-reduction program. It the first program in China to experiment using governmental financing institute as a re-lending platform. Read more here.
Odebrecht announced creation of a global council to assist the growth of companies and help fight corruption, after the scandalous ‘Operation Car Wash’ involving the Brazilian firm Petrobras. There are 10 members from various backgrounds, including Vinod Thomas, the Director General of Independent Evaluation at the ADB. This might indicate that the ADB will play a role in managing the ethics of Brazilian business practices. Read more here.
One Belt One Road updates
China expands its One Belt One Road initiative to the Arctic, signing a series of agreements on collective development of Arctic area with Russia. At the same time, China is building a large polar icebreaker with a Finnish company to improve its research in the Arctic. China has great interest in the north for several reasons. The Arctic holds one-fifth of the world's undiscovered gas and oil, it’s also the shortest and safest route from China to Europe, which can save China’s exporters time and money. In addition, cooperation with Russia on Arctic development could weaken U.S. global influence. Read more here.
Chinese investors have gradually withdrawn from New York housing market as the Chinese government tightened controls on foreign exchange and cracked down on corruption. But, after China’s 19th Communist Party Congress, many property developers and investors expect New York luxury home sales to heat up again. However, the Founding Chairman of Asian Real Estate Association of America, John Yen Wong pointed out China has been transferring money to countries along the One Belt One Road initiative, so New York housing market will keep cooling down in the future. Read more here.
An unidentified man threw a grenade into a workers’ dormitory in the Pakistani port of Gwadar, injuring 26 people. This attack has raised concern about the security of China’s OBOR initiative. Pakistan promised that it can provide security for the 57 billion USD project, but the militants have disrupted the project many times and more than 50 workers have been killed since 2014. Read more here.
On October 22, a delegation of Thai Ministry of Education officials, vocational school principals, and senior officials from the One Belt One Road initiative arrived at the Hunan Chemical Vocational and Technical College. They signed a cooperation agreement on the international exchange of vocational education. Projects under the agreement will include training Thai teachers in China, and student exchange programs. Read more here.
Chinese development partnerships around the world
China’s investments in Ecuador total 11.3 billion USD in 197 deals from June 2010 to May 2017. Entities with the largest investments include the Chinese Development Bank at 7 billion USD and the Export-Import Bank at 3.46 billion USD. In addition to these infrastructure investments, El Universo Ecuador reported that the petroleum industry in Ecuador 970 million USD in debt to the Industrial and Commercial Bank of China. Read more here.
Funding has stalled as Zimbabwe struggles to meet standards imposed by the Chinese Export-Import Bank in order to access promised capital of 1,178 million USD. Read more here.
On October 21, officials from the Chinese Development Bank and the Venezuelan Government met to discuss future Chinese investment in the Venezuelan oil industry. This will continue a 20-year partnership involving export preferences for Venezuelan crude to be shipped to China. Read more here.
One of Russia's largest banks, VTB Bank is to provide a loan to CEFC China Energy to finance acquisition of stake in Russia's Rosneft, one of the major Russian oil companies. While the Chinese Development Bank announced it would help finance the second stage of this acquisition. Read more here.
The European Bank for Reconstruction and Development (EBRD) will grant 500 million USD to finance the pipeline project Trans-Anatolian Natural Gas Pipeline in Turkey. Costing nearly 40 billion USD, this project is the most important part of the Southern European Gas Corridor and is expected to improve energy security as it diversifies energy sources to Europe. The EBRD investment complements the 2 billion USD investments from the World Bank, the ADB and the AIIB. Read more here.
Chinese finance partnerships: Energy buses to smart homes
Over the last five years, China's overseas assets of state-owned enterprises (SOEs) have grown at an annual rate of fifteen percent. This results from Chinese firms continuing to aggressively invest in new markets in Africa and Asia. These SOEs are a critical part of China's One Belt One Road initiative and focus on infrastructure development.
From roads to railways to communication, Chinese infrastructure investment projects partner with a variety of countries and firms, supporting its larger development framework. Over the last five years, the China Railway Construction Corporation has conducted business in 116 countries. It has supported projects such as the Haramain High Speed Rail in Saudi Arabia, the Ankara-Istanbul Railway in Turkey, and the Addis Ababa-Djibouti Railway in Ethiopia, among others. Read more here.
At the 2017 Busworld Kortrijk expo in Belgium, the Zhejiang CRRC Electric Vehicle Company debuted their 12-meter MTH fuel cell city bus jointly created with a Denmark fuel cell manufacturer. China's new energy buses are the latest example of Chinese transportation firms embarking on joint ventures with European manufacturers. New technologies include smart start, automated acceleration, and obstacle avoidance features. The buses will begin trial operations in the Danish city of Alborg. China plans to further develop energy buses and to facilitate entry of Chinese buses into European markets. Read more here.
The Chinese telecommunications firm Huawei has created a partnership with Deyaar Development, a UAE property firm. The two firms hope to offer smart home solutions and other home technology applications. Deyaar's CEO has expressed interest in pioneering connected homes, video cloud, and other technologies while Huawei's managing director has praised the initiative as another opportunity for China to expand digital transformation of infrastructure and investment, particularly in the Middle East, a region that China has been eyeing for a long time. Read more here.
Currents opinions on Chinese development finance
The AIIB continues to show financial world leadership, while U.S. foreign involvement is declining with the U.S. withdrawal from the Trans-Pacific Partnership and renegotiations of NAFTA. The consensus of El Periodico is that the U.S. will not take part in foreign infrastructural initiatives if it is not leading the project or getting the “best” deal. This attitude is not effective, since other countries will continue to invest. Meanwhile, China makes significant moves of economic and social diplomacy, following Xi Jinping’s initiative to make China the “Middle Kingdom.” Read more here.
In an interview with Chinese media, the Bulgarian Journalists’ Union General Secretary, Snezhana Todorova stated she disagrees with the negative views of Chinese economic development often found in Western media. According to Todorova, China has become a stable and reliable economic partner. She emphasized China's role in the AIIB and New Development Bank as examples of its growing status in the world. She also touted the 19th National Congress as a good platform for China to broadcast its positive aspirations to the world. Read more here.
Updates from the 19th National Congress of the Communist Party of China
In Xi Jinping's opening address at the 19th Party Congress, he affirms the importance of the One Belt One Road Initiative in establishing China's power internationally, saying that it will help achieve the dream of a Chinese modernized socialist society by 2049.