IslamicFinance.de

The planned China-Pakistan Economic Corridor, or CPEC, is expected to bring the full potential of Islamic finance in infrastructure funding into action. The CPEC will see €54bn in investments up to 2030 to create or expand highways, railways, ports, airports, power plants, solar parks and wind farms, pipelines and optical fibre lines. Pakistan’s Finance Minister Ishaq Dar has repeatedly emphasised that Pakistan wanted to make Shariah-compliant financing its first choice for infrastructure and long-term financing needs. In fact, the government plans to shift between 20% and 40% of its debt financing to Islamic sources from conventional ones, which is also the case for CPEC projects. Co-financing for the corridor comes from Chinese state loans, as well as from the Asian Development Bank and the new, China-backed Asian Infrastructure Investment Bank. The CPEC is predicted to create more than 700,000 direct jobs up to 2030 and add two to 2.5 percentage points to Pakistan’s annual economic growth.

The planned China-Pakistan Economic Corridor, or CPEC, is expected to bring the full potential of Islamic finance in infrastructure funding into action. The CPEC will see €54bn in investments up to 2030 to create or expand highways, railways, ports, airports, power plants, solar parks and wind farms, pipelines and optical fibre lines. Pakistan’s Finance Minister Ishaq Dar has repeatedly emphasised that Pakistan wanted to make Shariah-compliant financing its first choice for infrastructure and long-term financing needs. In fact, the government plans to shift between 20% and 40% of its debt financing to Islamic sources from conventional ones, which is also the case for CPEC projects. Co-financing for the corridor comes from Chinese state loans, as well as from the Asian Development Bank and the new, China-backed Asian Infrastructure Investment Bank. The CPEC is predicted to create more than 700,000 direct jobs up to 2030 and add two to 2.5 percentage points to Pakistan’s annual economic growth.

Meezan Bank, Pakistan’s first and largest Islamic bank has recently signed an MoU with Al-Sadiq Consulting Ltd, China’s first Islamic Finance consulting Company to explore opportunities for Islamic finance in China-Pakistan Economic Corridor (CPEC). The agreement focuses on the ever-increasing economic participation between Pakistan and China and the opportunities that may be derived from improved Islamic banking channels between the two countries.
The MoU was signed by Mr. Irfan Siddiqui, President & CEO – Meezan Bank and Mr. Ibrahim Ding, Managing Director and Senior Partner – Al-Sadiq Consulting at Meezan Bank’s Head Office, Karachi. A
Meezan Bank has also expressed interest in providing financial, advisory and Shariah-related services to such and similar projects and transactions in collaboration with Al-Sadiq Consultancy. Mr. Irfan Siddiqui, President & CEO – Meezan Bank welcomed the enthusiasm of the Chinese experts/delegate and said, “We are extremely confident that our new partnership with Al-Sadiq Consulting Ltd, China’s first Islamic finance consultancy company will successfully be able to drive more advantages for Islamic finance in the near future.

Pour permettre aux pays africains de régler leurs contrats de constructions de nouvelles infrastructures, il faut sans cesse trouver de nouveaux modes de financement. Les institutions internationales couvrent les deux tiers des projets, mais d’autres formes se développent, notamment à l’initiative de la Chine. Mi-novembre, le Sichuan Development Financial Leasing a annoncé qu’il allait vendre 300 millions de dollars de sukuk via Silk Routes Capital. Un fonds créé sur mesure à Singapour, piloté par des Chinois et une équipe de financiers internationaux. Une première pour la Chine dans ce domaine. Sur le continent, le Nigeria, le Sénégal ou encore le Soudan font de plus en plus appel à la finance islamique pour boucler les financements de projets ferroviaires et de gros équipements urbains.

China plans its first dollar sukuk issuance to tap a four-fold increase in Chinese funds that can invest in bonds overseas. Sichuan Development Financial Leasing plans to sell $300 million of Islamic bonds via Singapore-based special purpose vehicle, Silk Routes Capital. According to investment manager Hasif Murad, the predominant interest for this issuance will remain from yield-hungry domestic Chinese investors. Silk Routes Capital hired Standard Chartered, CIMB Group Holdings, Bank of China and Bank of China International to help to arrange investor meetings. In a sign that the traditional Silk Road is coming back to life, Chinese companies are building roads, railways and ports along the route to the Middle East, Africa and Europe.

China plans its first dollar sukuk issuance to tap a four-fold increase in Chinese funds that can invest in bonds overseas. Sichuan Development Financial Leasing plans to sell $300 million of Islamic bonds via Singapore-based special purpose vehicle, Silk Routes Capital. According to investment manager Hasif Murad, the predominant interest for this issuance will remain from yield-hungry domestic Chinese investors. Silk Routes Capital hired Standard Chartered, CIMB Group Holdings, Bank of China and Bank of China International to help to arrange investor meetings. In a sign that the traditional Silk Road is coming back to life, Chinese companies are building roads, railways and ports along the route to the Middle East, Africa and Europe.

The investment arm of the Sichuan provincial government has hired four banks to help raise $300 million via Islamic bonds, the first such deal from a Chinese state-owned company. According to advisor Bobby Tay, the five-year sukuk will be raised through the leasing arm of Sichuan Development Holding (SDH) and is expected to be completed in the next two months. CIMB, Standard Chartered, Bank of China and Bank of China International have been hired to arrange the transaction, with proceeds to be used for the acquisition of sharia compliant assets in mainland China. The sukuk will include credit enhancement features and be listed in Singapore, with listing in other regional exchanges also being considered.

The Silk Road Economic Belt and 21st Century Maritime Silk Road, or the One Belt, One Road (OBOR) initiative is central to China’s evolving role in the global economy. OBOR, unveiled in 2013, is China’s ambitious policy of revitalising the infrastructure of the ancient Silk Road trading routes and forging new trade routes. It offers great opportunities for the GCC in terms of inbound investments from China as well as the chance to deepen economic, cultural and diplomatic ties with Beijing. For the UAE is particularly important to showcase Dubai’s ability to provide China with a gateway to accessing regional liquidity and its expertise in Islamic finance. However, there are constraints arising out of stakeholders’ lack of familiarity with Islamic finance and the current Chinese policies and laws, which only cater for conventional financing methods.

With only roughly 20 million Muslims in #China, it is not surprising that Islamic finance has not taken off in China. However, some Chinese companies have expressed interest in tapping into offshore pools of Islamic funds. For example, HNA Group, the owner of Hainan airlines, is considering Islamic financing options for its proposed US$ 150 million acquisition of ships as well as a large offering of offshore Sukuk. Another example is that of Country Garden, which issued a Malaysian Ringgit 1.5 billion sukuk through its Malaysian subsidiary in December 2015. Chinese interest in Islamic finance can be motivated by the diversification of funding sources as much as financial diplomacy purposes. China’s growing geo-political clout via the Asian Infrastructure Investment Bank (AIIB) and the 'One Belt, One Road' initiative affords new incentives to facilitate the use of Islamic finance.

The worst time for global markets may be the best time for Hong Kong’s government to carry out its planned third Islamic bond sale. Aberdeen Islamic Asset Management says the time is ripe for a sukuk. The yield on the city’s five-year Shariah-compliant bonds sold in September 2014 has fallen 32 basis points to 1.56% since February. Sales of dollar sukuk are at an all-time high for this time of year, suggesting there’s appetite for an issue by Hong Kong, rated AAA by S&P Global Ratings.

The Silk Road Economic Belt and Maritime Silk Road initiative, now known as One Belt One Road (OBOR), was designed in 2013 to develop economic cooperation between China and Eurasia. The Chinese government has now decided to speed up the operation of the Silk Road fund. Proposals to strengthen the cooperation of China-ASEAN Interbank Association have also been completed. Also a High Speed Rail project in China is considering using Islamic securities to raise a fund for almost 30 billion Chinese yuan (US$4.7billion). In addition, Hainan Airlines Group is planning to raise US$150 million for ship purchasing and to raise offshore Islamic securities.

The first China-UAE Conference on Islamic Banking and Finance is organized between May 24-25, 2016 in Beijing, China. The Conference will serve as an international platform for experts, decision-makers, scholars, academicians and other Islamic Banking and Finance stakeholders to exchange knowledge and best practices. The debuting conference aims to capitalize on the strategic ties between the UAE and China to identify challenges and opportunities related to Islamic finance.

Shariah-compliant firm Mawarid Finance and Fullgoal Asset Management from Hong Kong will launch an Islamic fund later this year in order to tap opportunities in China. Michael Chow, Managing Director and Head of International Business at Fullgoal Asset Management (Hong Kong) Limited, said his company tied up with the Dubai-based firm, hence opening door for the investors here to capitalise on the business opportunities offered by the world’s second largest economy. Chow expects Mawarid to design Shariah-compliant products for the investors over the next couple of months and the two entities will launch an Islamic fund later this year.

China is preparing for an unprecedented overhaul in how it treats its trillions in non-performing loans. They officially amount to $614 billion but are realistically anywhere between 8% and 20% of China's total $35 trillion in bank assets. It is the unknown treatment of these NPLs that has been the greatest threat to China's just as vast deposit base amounting to well over $20 trillion, which has been the fundamental catalyst behind China's record capital flight as depositors have been eager to move their savings as far from China's domestic banks as possible. As a result, China is reportedly preparing regulations that would allow commercial banks to swap non-performing loans of companies for stakes in those firms.

With a more inclusive foreign policy, including a renewed stance on the Middle East and Africa, Chinese president Xi Jinping has set in motion greater China-OIC relations, with the ‘One Belt, One Road’ initiative a central pillar to China’s grand strategy. In light of this development, the Islamic Corporation for the Development of the Private Sector (ICD) is hosting an event to connect investors and regulators from Asia, Africa and the Gulf with senior decision-makers of the world’s second-largest economy. To be held in Beijing on the 22nd March, 2016, the pioneering China OIC Forum aims to enhance partnerships between key industry players and multilateral bodies as well as identify joint investment opportunities.

Hong Kong’s possible third Islamic global bond in three years brings it closer to Indonesia and Malaysia in terms of sovereign sukuk presence, a boost to the market that coincides with China’s Silk Road revival. The finance center has already raised $2 billion from sales in 2014 and 2015, which attracted $6.7 billion in total orders, while Indonesia plans to tap investors for the sixth year running and Malaysia is returning for its seventh offering. Hong Kong, which is losing its role as a gateway to China as Shanghai’s financial market opens, is keen to become the launchpad for the global ambitions of Chinese companies.

Visa Incorporated recently announced partnerships with two organizations to promote financial inclusion in China: the China Foundation for Development of Financial Education (CFDFE), which is affiliated with China’s central bank and seeks to alleviate poverty, and the China Foundation for Poverty Alleviation (CFPA), a government-backed organization focusing on emergency relief. Visa will collaborate with CFDFE to build the “China Financial Inclusion and Education (Jinhui Project) International Demonstration Zone” to facilitate financial education and capacity building. In partnership with CFPA, Visa will launch a mobile phone-based program in Inner Mongolia to educate farmers in eight counties and to promote Internet-based financial services.

Zhang Xiangyin still remembers the day his daughter-in-law left home three years ago, leaving her 33-day-old son. She could no longer bear living entrenched in poverty in their mountain village.
Zhang, a 58-year-old farmer in Bijie City of southwest China's Guizhou Province, knows exactly what poverty means. With two daughters, who got married and moved away and his son in the coastal Shenzhen City as a migrant worker, the baby boy was left to the elderly couple.
But two 11-month-old Simmental cows he bought with a 24,000-yuan (3,762 U.S. dollars) government loan this September are expected to change his fate.
"The cows will give birth soon and are likely to have four calves within three years, which would produce 40,000 yuan in revenue," said Zhang.
After four years, Zhang expects between 20,000 to 30,000 yuan in net profits with newborn calves, which would lift him out of poverty.
In the past, Zhang was too poor to think of raising cows. A cow costs 12,000 yuan in the local market while Zhang's annual income was just a tenth of that, relying on a tiny plot of corn and potato crops.

Kazakhstan's parliament has approved legislative amendments to facilitate Islamic finance, paving the way for Central Asia's largest economy to issue its first sovereign sukuk next year, a government official said.
The amendments, which still require the president's signature, would also allow for the conversion of conventional banks into Islamic ones, said Yerlan Baidaulet, an adviser to the Investments and Development Ministry.

«We expect the sovereign sukuk in early spring of next year. Probably in March, it depends on the decision of the Ministry of Finance as it has its own budgetary process», Baidaulet said on the sidelines of an industry conference in Kuwait. The legal amendments to the banking services and securities laws are the latest steps by the majority Muslim state to help develop Islamic finance. A dedicated Islamic banking law is also currently in preparation, Baidaulet said. Lawmakers have also passed a law to establish an offshore centre in the capital Astana, which is partly aimed at attracting Islamic finance business, he added.

Finance from Islamic nations wants to play an important role in China's Belt and Road initiative, Turki bin Faisal Al Saud said at the International Finance Forum in Beijing on November 7.
Also known as Turki Al Faisal, Prince Turki is a member of the Saudi Arabia royal family, one of the founders of the King Faisal Foundation and chairman of the King Faisal Center for Research and Islamic Studies.
"I'm glad to see that the AIIB (Asian Infrastructure Investment Bank) is considering taping Islamic funds," he said. "Islamic finance is very suitable for infrastructure financing, and we want to contribute to the One Belt One Road."
The initiative is composed of infrastructure development across Asia and Europe. It's estimated that China will invest a total of $900 billion and spur a regional input of $300 billion.
Chinese banks having been raising clout in the Gulf such as issuing bonds. The country is also strengthening its trade relations with Islamic countries.
However, the plan comes with risks, as Chinese companies have to first become familiar with Islamic finance, which has complex rules.