China to let firms tap stock markets for new Silk Road projects

China's President Xi Jinping in Helsinki, Finland April 5, 2017. Lehtikuva/Vesa Moilanen/via REUTERS

BEIJING (Reuters) - China will allow firms to tap domestic and overseas stock markets to finance projects related to the “One Belt One Road” initiative, a senior securities regulator said in comments seen on Friday.

Chinese President Xi Jinping has championed the “One Belt, One Road” (OBOR) initiative to build a new Silk Road linking Asia, Africa and Europe. Leaders from 28 countries will gather in Beijing on May 14-15 to discuss the plan, which involves investing billions of dollars in infrastructure.

China will develop direct financing to meet huge funding needs for the OBOR program, which has been relying on China’s policy banks and big commercial banks, Fang Xinghai, a vice head of the China Securities Regulatory Commission, said in an article published in the central bank’s China Finance magazine.

China will encourage high-quality local firms to raise funds on the domestic A-share market to “safeguard financing demand for key OBOR projects” and also raise funds from overseas stock markets, including Hong Kong’s H-share market, Fang said.

Firms will be allowed to issue bonds, including panda bonds issued by foreign companies in China, to support such projects, he said.

China will also quicken the development of offshore yuan markets, open up financial markets wider to foreign investors, and provide more trading tools and investment channels for foreign investors, Fang said.

Fang said project financing involved in the “One Belt One Road” program would mainly use the U.S. dollar, raising the risk of exchange rate fluctuations.

Central bank governor Zhou Xiaochuan said in an article published in the same magazine that using local currencies instead of dollars or other major currencies for OBOR initiative investments would reduce that risk.

Reporting by Kevin Yao; Editing by Simon Cameron-Moore