China’s launch of both the Silk Road Fund and the Asian Infrastructure Investment Bank (AIIB): two key initiatives announced at this month’s Asia Pacific Economic Co-operation (Apec) summit in Beijing.
In an exclusive interview with GTR, head of transaction banking in Europe at ANZ Bank, Peter Sargent, says initiatives such as these will encourage the evolution of western lenders’ approach to China as a trading entity.
“These announcements signal an attempt by China to control more and more of its trade flows, it’s the emergence of a big new trend: the Chinese taking control of their supply chains,” he says.
“Western banks’ approach to lending in China should evolve, rather than change, with the understanding that by 2020, 60% of world trade will have a foothold in Asia, re-defining where the centre of world trade is located.”
These announcements signal an attempt by China to control more and more of its trade flows.
Promising US$40bn to establish a Silk Road Fund that’ll facilitate new land and sea trade routes with China’s neighbours to the west, and US$50bn of capital to establish the long-heralded AIIB, Chinese president Xi Jinping’s announcement to representatives of Apec’s 21 member economies effectively sets out a framework for a new multilateral financial world order that provides the country with greater control over how it spends its wealth.
“It’s important to look at these initiatives together as part of a whole,” Sargent tells GTR. “At once, China is trying to find a way to improve its infrastructure and break the stranglehold that American and European shippers have over its transport.”
Asked whether the announcements will change ANZ’s strategy towards China, Sargent says that it will, suggesting other banks should be re-evaluating their positions in the country if they weren’t already.
“Banks need to be in the middle of the vast amount of infrastructure work that’s needed in China,” he says. “ANZ already has six branches in China and I’m sure that’ll grow. Being an Australian bank, we see a lot of European corporates who’ve done business in Australia and who are now looking for that jump into Asia.”
“Many large infrastructure projects in Australia are now coming to fruition and firms want to move their machinery and other assets to new projects in Asia, rather than have to transport them home.”