Mr. Jose Vinals, Group Chairman of Standard Chartered Bank. recently received an interview with China Belt and Road Portal and shared the company's experience in conducting the Belt and Road projects, especially in risks control. He believes that as Belt and Road projects are developing from quantity-focused to quality-focused, multilateralism will be more important in the future.
Q1: What impresses you most in President Xi Jinping's keynote speech?
Vinals:I thought it was a very inspiring speech. I was impressed by the very open tone. It conveyed the idea that the Belt and Road Initiative is not an exclusive club, but a very inclusive club, which welcomes third parties, multilateral parties, and the economic, financial, and environmental sustainability of projects is very important.
Q2: President Xi Jinping said in his keynote speech that China will further open up to foreign investment. How will Standard Chartered take this opportunity to seek further development in China?
Vinals: Standard Chartered is present in China already for a hundred and sixty-one years. We are a bank which is deeply involved in capital market activities in China. We are an international bank with the largest number of licenses. So, we think of ourselves as contributing to the development of the Chinese capital market.
Given our connectivity with key international financial centers, like London, Hong Kong, and Singapore, we can bring in a lot of foreign investment into China. That's also another way in which we can contribute.
Finally, we have been working already for quite a long time to promote the internationalization of the Renminbi. We are very well placed to use our international global presence to be a strong promoter of Renminbi as an increasingly important international currency. This is very natural particularly along Belt and Road countries where the Renminbi should be playing an increasingly important role as a vehicle currency.
Q3:How do you evaluate the achievements of the Belt and Road Initiative over the past six years?
Vinals:I think the Belt and Road Initiative has been very important already in helping build many infrastructures which have improved connectivity across countries. This connectivity is a necessary condition for enhancements in trade, which will help in turn growth and development. So I think this is the basic objective.
During the first five years of the Belt and Road Initiative, there has been an emphasis on the quantity of projects. There is increasingly less but still important engagement which has been bilateral between China, meaning Chinese government, Chinese contractors, Chinese banks on the one hand, and the recipient countries on the other on different projects. I think it is very important that in this second stage we take increasingly into account not just of the quantity of projects but project quality.
And also in line with what President Xi Jinping mentioned, we broaden more engagement to more multilateralism and less bilateralism. This is already happening but we need to move further in this direction.
Q4: Some critics believe that China's foreign exchange reserves may be reduced in the future as international trade is under pressure. Under this circumstance, the Belt and Road Initiative may face some capital challenges. What's your take on this point of view?
Vinals: I do not agree with that view. I think the Belt and Road Initiative and the foreign exchange reserves are two different things. Responding specifically to the question of the foreign exchange reserves, I think if you look at the balance of payments of China, even if there's now less of a current account surplus than in the past that there may be a deficit. You also have increasing capitals inflows coming. So what I have envisioned is in the future as China opens up, particularly to international capital markets, there would be increasingly net capital inflows into China that will compensate a less favorable position on the overall current account. Therefore, I don't see any reason why there should be an important drop in foreign exchange reserves.
Q5: Why does Standard Chartered make the Belt and Road Initiative as its strategic priority for the bank? What have you implemented?
Vinals:We have designed or designated the Belt and Road as one strategic priority because it's very natural to us. We are present in 45 of the Belt and Road markets. We have been in these markets for a long time, in the majority of them for more than a hundred years. We have deep knowledge of the local markets. We understand the risks. We have strong capabilities in project finance. We have strong capabilities and knowledge of different industry sectors, like infrastructures, energy, water, and waste. So, it is only natural that we can bring in all of these sorts of expertise together and be a natural partner for Belt and Road. In addition, we have been in China for 161 years. So, we are very much connected with our Chinese clients, both financial and non-financial clients. We are at the originating end and recipient end. We also bring in a lot of expertise on how to deal with international financial institutions in order to bring in the best for the Belt and Road. So, it's very natural for us to be playing this role and make the Belt and Road Initiative a key strategic priority for Standard Chartered.
Q6:What measures does Standard Chartered take to prevent or control risks associated with projects of the Belt and Road Initiative?
Vinals:To give you an example, last year alone, we were involved in nearly a hundred projects along the Belt and Road countries. We facilitated funding for these projects in excess of twenty billion dollars, just in 2018. Each of the projects that we have participated is subject to a very careful analysis of risks. Not only credit risks but also things like conduct risks, financial crime risks, things like corruption, money laundering, etc. We also assess risks regarding the social and environmental impact of those projects. We have very high standards on each of those risks that I have mentioned. It's only when the project passes the bar for each of those risks that we decide to go ahead. So, we have a very systemic and structured approach to risk analysis for Belt and Road projects.