The FINANCIAL -- Shanghai – Commerzbank today published a new white paper which examines how China’s Belt & Road Initiative (BRI) is influencing trends in Chinese outbound Mergers & Acquisitions (M&A), exports, financing and risk management.
In particular, the corporate profile and financing requirements of Chinese companies is being transformed as a result of BRI, with increasingly sophisticated requirements for cross-border and financing solutions relating to key BRI corridors.
The white paper provides Commerzbank’s insights on how Chinese companies are fast learning how to overcome new challenges as they increasingly partner with foreign companies and become more adventurous when making BRI-related investments.
Commerzbank contends that BRI is helping to influence how Chinese companies talk to governments, engage with local investors, regulators and populations, learn about cultural obstacles, raise funds from international investors, attract partners and with a view to improving their global standing.
In Europe, for example, Chinese companies are helping to change perceptions by clearly outlining their intentions to protect jobs and safeguard technology. Meanwhile, in sub-investment grade markets, and regionally along the BRI route, local regulations can be difficult to navigate and non-payment risks are higher, creating a need for local expertise in order to better understand the environment and the appropriate hedging products to mitigate risks. Companies are now more aware of consolidated hedging at the group level to control investment risks overseas, according to Commezbank.
Perpetuating this is the experience of European companies and financial institutions, which are being increasingly utilised by Chinese companies as they scout projects, negotiate deals and build relationships that are accelerating the evolution of Corporate China.
The white paper also looks at the unprecedented opportunities presented by BRI to increase Environmental, Social and Governance (ESG) awareness in China, including financing tools - such as green bonds, green loans and climate bonds - and is hastening the arrival of more standardised global standards when it comes to what constitutes green financing. This comes against the backdrop of Chinese companies meeting the infrastructure needs of various non-investment grade countries that generally rely on non-renewable fuels such as coal. Managing this balancing act could be a pivotal moment for ESG.