How will China use the 100 billion yuan Silk Road Fund?

President Xi Jinping of China at the opening ceremony on Sunday for the Belt and Road Forum. Photo: Mark Schiefelbein

After Xi Jinping announced at the opening ceremony of the Belt and Road Forum for International Cooperation on Sunday that his country would contribute an additional 100 billion yuan to the Silk Road Fund as part of efforts to increase the financial support to the "Belt and Road" initiative, the Communist Party of China (CPC)'s mouthpiece Xinhua News Agency published two articles to shed light on how the money will be used.

In a Monday article titled "Why we spend the money? How the money will be used?", an official from the foreign aid department of China's Ministry of Commerce explained that the government would use 60 billion yuan for the non-reimbursable assistance and interest-free loans, provide emergency food aid worth 2 billion yuan to the countries along the Belt and Road and add $1 billion to the South-South Cooperation Fund. The official also said that aid worth $1 billion would be provided to the developing countries and international organizations, which will be used in the areas of poverty relief, agriculture, education, sanitation and the environmental protection.

The official hailed the foreign aid measures Xi pledged at the forum as "a solution to the global governance" and a way to "help the related countries put into practice the 2030 Agenda for Sustainable Development". "It will bring huge benefits to the countries along the Belt and Road ... and shows China's responsibility to promote the common development of human beings," the official said.

In addition, the China Development Bank and the Export-Import Bank of China will also set up special lending schemes worth 250 billion yuan equivalent and 130 billion yuan equivalent respectively to support the "Belt and Road" cooperation on infrastructure, industrial capacity and financing, Xi said on Sunday.

In a separate article titled "How the additional 100 billion yuan Silk Road Fund will be used?", the authors elaborated on the reasons why the Chinese government added capital to the Silk Road Fund and how the fund would be used.

The article quoted Yi Gang, vice governor of the People's Bank of China (PBOC), the country's central bank, as saying that the additional capital would be "helpful in deepening China's investment cooperation with the countries along the Belt and Road".

Yi also said that as of the first quarter of 2017, the Silk Road Fund has signed 15 projects, with a commitment to invest a total of $6 billion in Russia, Mongolia, Central Asia, South Asia, Southeast Asia, Western Asia, North Africa and Europe.

China's tremendous investment in the "Belt and Road" cooperation has raised concerns among the Chinese scholars, with Huang Yiping, vice president of the National School of Development at Peking University, worrying about the profitability of the investment projects under the "Belt and Road" initiative.

"(We should) be cautious about the outbound investment by the state-owned enterprises which have budget constraint, as many of the investments are unprofitable," Huang said in an article published on Caixin's website in 2015.

On the social media platforms, many Internet users also voiced concerns over China's investment, describing it as a way to "increase influence by burning money".

In response to the questions, Yi said in the Xinhua article that the investment by the Silk Road Fund is remunerative and sustainable. "China's investment in the 'Belt and Road' projects is not one-way capital support," Yi said, classifying the Silk Road Fund as an investment fund.

On the eve of the Belt and Road Forum at a press conference, Xiao Yaqing, chairman of the State-owned Assets Supervision and Administration Commission, boasted the achievements China has made over the past three years through making investment in the "Belt and Road" projects, in a show of the profitability of the new Silk Road plan. The past three years saw an annual investment growth rate of 15 percent and an annual sales growth rate of 4.5 percent on average, Xiao said.

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