China, UAE Ink Deal To Open ‘Belt and Road’ Exchange in Abu Dhabi

It’s another big step for the Belt and Road Initiative (BRI); Investors and businesses seeking to tap into Beijing’s flagship project under BRI — the China-Pakistan Economic Corridor (CPEC) — could become its first beneficiaries, observers say.

April 25, 2018 (BE2C2) — China’s largest securities exchange, the Shanghai Stock Exchange agreed a deal in principle with Abu Dhabi’s international financial market platform, the Abu Dhabi Global Market (ADGM) on Monday.

Dubbed the ‘Belt and Road Exchange’, the two financial market giants in the region will support businesses and investors along Beijing’s ambitious infrastructure-centric Belt and Road initiative encompassing 65 countries across three continents.

This Beijing-backed scheme plans to link the world’s second-largest economy to the west via a vast land and maritime infrastructure network across Eurasia– by 2030 the Chinese economy is projected to be twice the size of America’s.

“We are very excited and pleased to enter into this MoU with Shanghai Exchange to establish a Belt and Road Exchange,” Richard Teng, chief executive of ADGM’s Financial Services Regulatory Authority, said on Tuesday.

Teng did not give specifics of which instruments the new exchange would trade — or when it might open — but explained that as the platform offered “endless opportunities” to investors in the region, it would be prudent to keep all of their options open for now.

“What we are looking at is a platform serving the Middle East, North Africa and South Asia region (and) serving the Belt and Road economic route,” he told CNBC. Investors and businesses seeking to tap into Beijing’s flagship project under BRI — the China-Pakistan Economic Corridor (CPEC) — could become its first beneficiaries, observers say.

Countries involved in the BRI’s infrastructure development scheme, many of them emerging economies in dire need of investment, obtain funding in various forms, such as sovereign loans from Chinese President Xi Jinping’s administration and credit from Chinese state-owned banks. Pakistan is one of them.

But concerns of developing countries taking on unrealistic financial obligations have sparked allegations of what’s being called ‘debt-trap diplomacy’.

The international exchange will fulfill the investment and financing needs for issuers, investors and market participants within the Middle East, North Africa (Mena) and South Asia region, along the Belt-and-Road route, and globally.

When established, the Belt and Road exchange in Abu Dhabi will serve as a key international capital-raising platform supporting Chinese enterprises, foreign companies and global organizations to finance their investments. Bangladesh and Nepal– both countries along the BRI pathway would also benefit, observers say.

SSE which has more than 1,300 listed companies, is the world’s fourth-largest exchange, after the NYSE Group, Nasdaq and Japan Stock Exchange, with a market capitalization of more than $5 trillion.

“Shanghai Stock Exchange is pleased to enter into this landmark MOU with Abu Dhabi Global Market,” said Que Bo, deputy president of the Shanghai Stock Exchange.

“We will continue to work closely with ADGM and strategic partners to determine the operational model, product offerings and critical path to success in achieving the common objective of establishing a world-class One Belt One Road Exchange.”

Abu Dhabi is looking to increase the standing of the ADGM on the international stage as part of a drive to diversify the emirate’s economy beyond oil exports.

Geography and infrastructure dictate Abu Dhabi takes a role in any greater Eurasia project like BRI, several analysts say.

The Middle East countries have shown great interest in the BRI. All the Middle Eastern states, bar five, are members of the Asian Infrastructure Bank, and three of the 12 directors are from the region.

In recent years, trade and investment links between China and the six-nation Gulf Cooperation Council (GCC) have grown rapidly.

China is the UAE’s second largest trading partner while the UAE is China’s second largest partner in the Gulf region.

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