Recently, in order to give full play to the role of capital markets in resource allocation and to better serve the Belt and Road Initiative (“the Initiative”), China Exchanges Services Company Limited (“CESC”), a joint venture established by Shenzhen Stock Exchange, Shanghai Stock Exchange, and Hong Kong Exchanges and Clearing Limited, held a media conference and investment forum for release of a research report, the Belt and Road Initiative: Participation of Listed Companies under the Stock Connect (“the Report”).
Since 2017, with support from the three Stock Exchanges, by using questionnaires, CESC has collected from 1,286 listed companies under the Stock Connect business information about their participation in the Belt and Road construction. Based on the quantifiable factors of “Facilities Connectivity”, “Unimpeded Trade”, and “Financial Integration” in “Five Cooperation Priorities”, CESC developed the following six indicators to analyze the listed companies’ participation in the Belt and Road: engineering contracts, investments, sales, procurement, loans, and insurance. The data shows that a growing number of listed companies are participating in the Belt and Road construction, and 65% of the companies are expected to increase business related to the Belt and Road in the coming three years.
In terms of sectors, the majority of listed companies engaged in sales, procurement, and new investment projects related to the Belt and Road are energy companies in the preliminary period. Due to oil price fluctuations in the past few years, energy companies’ business along the Belt and Road has declined. The revenues of infrastructure companies’ business along the Belt and Road have grown rapidly. On the whole, energy, raw materials, and infrastructure companies in the traditional sectors are in the majority, and consumption, IT, and healthcare companies in some emerging sectors are increasing.
In terms of enterprise types, state-owned enterprises are the main force engaged in business related to the Belt and Road in the preliminary period. Their non-financial business accounts for more than 60% of the total amount, and procurement and engineering contracts account for 90%. With the development of the Belt and Road Initiative, more private enterprises undertake construction projects. From 2014 to 2016, the growth rate of private enterprise participants and the amount of new engineering contracts doubled, and new investments grew exponentially.
In terms of capital sources, the listed companies’ loans for projects related to the Belt and Road are mainly from overseas commercial banks, while the loans from Chinese state-owned commercial banks are increasing. The data shows that Chinese financial institutions, both state-owned and non state-owned, are actively increasing their overseas financial business.
At present, the listed companies mainly operate business related to the Belt and Road throughout Southeast Asia. Each country covered by the Initiative has its own characteristics. For example, Indonesia is known as a country of consumption, Thailand as an emerging country of origin, Vietnam as a textile and garment center, and Saudi Arabia as a major oil producer. Besides, the investment flow shows that the Initiative is expected to influence or have radiation effect on more emerging and broader markets such as Bangladesh, Laos, and Egypt.
URL of the Report: http://www.szse.cn/UpFiles/largepdf/20180719104032.pdf
