The Chinese government is considering allowing companies involved in the One Belt, One Road Initiative to issue RMB-dominated initial public offerings on the Hong Kong Stock Exchange, to strengthen Hong Kong market’s role as a key offshore RMB hub.
The government will select top companies related to the initiative and help them with fundraising on the Hong Kong Stock Exchange. The plan is currently under discussion and no timeline has been set for the IPO’s, according to state-owned media reports.
"Through such attempts, the government hopes Hong Kong would be able to play a greater role in facilitating the initiative on the investment front and further promoting internationalization of the yuan," said Zhang Xiaoqiang, vice-chairman of the China Center for International Economic Exchanges, in an interview with state-owned media.
Hong Kong’s lack of restrictions on capital and currency convertibility makes it ideal as a core center for raising capital for Belt and Road Initiative-related projects, he added.
The One Belt, One Road Initiative was introduced in 2013 to promote economic cooperation between China and nations in Southeast Asia, the Middle East, and Central and Eastern Europe.
The Chinese government has backed the launch of several major investment funds to boost the initiative. In May, Chinese President Xi Jinping said an additional RMB100 billion (US$14.50 billion) would be pumped into the Silk Road Fund, China’s the largest policy fund with US$40 billion under management, to help finance infrastructure projects in Asia and upgrade trade and transportation links between China, Central Asia and Europe.
Two months later, the Russian Direct Investment Fund (RDIF) and China Development Bank (CDB) agreed to establish a RMB68 billion (US$10 billion) China-Russia RMB Investment Cooperation Fund, as part of China’s One Belt One Road initiative to improve connectivity between Eurasian countries. In December, China and the United Kingdom also agreed to set up a bilateral investment fund with an initial target of US$1 billion to support projects under the Belt and Road Initiative.