Asian Inroads

Deutsche Bank to Help Finance China’s Silk Road

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No stranger to the Middle Kingdom. Picture source: Reuters

Germany’s Deutsche Bank will be one of the first foreign lenders to participate in China’s new Silk Road infrastructure initiative. The lender has signed a collaboration agreement with the state-run China Development Bank, a Deutsche Bank spokesman confirmed to Handelsblatt. The agreement includes a pledge to finance projects with a scope of up to $3 billion for an initial duration of five years.

Germany’s largest bank is one of the first foreign institutes to actively participate in the development initiative, providing the China Development Bank with an inroad into Europe. The Chinese government aims to expand transportation and trade along the historic silk route and is offering to include foreign companies in the process.

China’s gigantic infrastructure initiative does not only bolster the country’s economic importance. President Xi Jinping is keen to emphasize China’s geopolitical and global leadership role, calling for an abandonment of old models based on rivalry and diplomatic power games.

But critics accuse China of exploiting the initiative to boost exports, while at the same time keeping up import barriers for goods of other countries.

At the end of the day, infrastructure is a good business, however, and it might even benefit German construction and engineering companies. Deutsche Bank and China’s Development Bank said they aimed to finance projects that were mutually beneficial to customers of both institutes. The German lender and CDB want to promote the internationalization of the Chinese currency as part of their cooperation.

According to financial sources, Deutsche Bank is also seeking permits to issue so-called “Panda bonds,” which allow companies to borrow cash in Yuan. There are only a handful of international banks in possession of such a license and able to place panda bonds.

“The bank wants to offer its entire range of products to the relevant companies and not allow competitors to snatch up such business,” a person close to the matter told Handelsblatt. Deutsche Bank declined to comment on the speculations.

Yasmin Osman is a financial editor with Handelsblatt’s banking team in Frankfurt. To contact the author: osman@handelsblatt.com

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