Q&A
On Monday, during President Xi Jinping's visit to Pakistan, representatives of the Silk Road Fund signed a memorandum of understanding with China Three Gorges Corp and Pakistan's Private Power and Infrastructure Board to jointly develop the Karot Hydropower project.
It is the first investment by the SRF since it was established in December. The fund published a statement to address questions about its recent development.
Why was Pakistan's hydropower project chosen by the SRF as its first project?
The SRF operate as a market-oriented commercial institution, aiming to achieve mutual benefits for investment partners. "Professional, prudent, consistent" are the main principles for selecting projects.
We select projects that can benefit local development and also be feasible. Both the economic and social benefits should be considered, and our project partners should all meet international standards. It only took a short time to make an investment decision on the hydropower project in Pakistan as the first project, as it dovetails with our investment principles perfectly.
Can you explain how they dovetail?
First, the project resonates with the two countries' development targets and reflects the SRF's investment philosophy to achieve win-win outcomes.
As a long-term development and investment fund, the SRF targets investment opportunities associated with the implementation of China's Belt and Road initiative and aims to provide financing services and promote economic ties and connectivity between China and other countries.
Second, cooperation with international and domestic institutions is a testimony to the SRF's attitude of openness and inclusiveness.
In this project, the SRF and the International Finance Corp, a member of the World Bank Group, are shareholders of Three Gorges South Asia Investment, which is the China Three Gorges Corp's subsidiary and will be used to invest in clean energy. At the same time, we joined the consortium made up of the Export-Import Bank of China, China Development Bank and the International Finance Corp to provide loans.
Third, the project has sound risk management and is expected to achieve reasonable long-term returns.
The Pakistan government promised a sound return after recovering construction and operation costs. Pakistan's power sector has huge market potential, and the risk is relatively low.
What steps has the SRF taken to accelerate its outbound investment?
The SRF has established and improved its investment decision-making process, as well as expanded business by contacting relevant government departments and enterprises. We also strengthened the project evaluation and selection processes. So far there are a number of key projects involved in the Belt and Road initiative that we have plans to invest in.
What is the next step for the SRF?
The SRF will continue to look for opportunities involved in the Belt and Road initiative. It will steadily carry out investment projects while maintaining the standard of being market-oriented, internationalized and specialized.
We will enhance mutual understanding and trust with partners through the projects, to avoid impulsive investment, and bolster communication with the public. We will also respect local laws and international standards, while taking into account both the economic and social benefits.
Silk Road Fund Established Dec 29, 2014 Headquarters Beijing
The fund will be used to provide investment and financing support for infrastructure, resources, industrial cooperation, financial cooperation and other projects in countries involved in the Belt and Road initiative. Chinese central bank Governor Zhou Xiaochuan described the fund as a "private equity investor with a longer investment return".
