Hong Kong has the potential to play a bigger role in the Belt and Road (B&R) Initiative, according to Qianhai Institute for Innovative Research President Edward Chen Kwan-yiu.

One solution is greater cooperation with Shenzhen's Qianhai special economic zone, he told China Daily on the sidelines of a China Daily Asia Leadership Roundtable Luncheon on Wednesday.

Chen said while the Hong Kong government has put in a lot of emphasis on its participation in the B&R Initiative, the city is certainly able to achieve more, especially in the involvement of its banking sector.

"So far, there are very few big projects to our knowledge the banking sector (of Hong Kong) seem to be rather reluctant to participate as the payout period is too long," he said.

"Hong Kong banks, they don't like payout period longer than 10 years, but the investment period for most infrastructure projects (of the B&R economies) are at least 20 years."

Hong Kong should ideally be a financing platform for infrastructure projects, due to the city's status as a global financial center, but then there seems to be a mismatch in terms of the structure of payback periods.

While a payback period of 20 years may seem too long, it does not mean that Hong Kong cannot play an important role through financial innovation, including securitizing long-term investment and turning the investment into bonds or other financial instruments, Chen said.

The central government has placed Shenzhen's Qianhai as a special economic zone to experiment with new financial policies, he said. This decision was taken because of Qianhai's proximity to Hong Kong, so that Qianhai could learn from the financial expertise, experience and institutions of its neighbor.

He pointed out that Hong Kong and Qianhai complement each other, as Qianhai enjoys favorable and innovative policies while Hong Kong possesses talent and experience - by working together, the two will be able to form bigger roles in the region.

Chen said Qianhai is very eager to cooperate with Hong Kong, and that Hong Kong should set up large companies in Qianhai to take advantage of favorable policies. Doing so would make it easier for Hong Kong companies to invest in projects in the B&R region, particularly in terms of risk management, he said.

"We can work together with Qianhai to introduce new financial products and launch them on the Chinese mainland, for example, to raise funds," he said.

As Hong Kong banks are not so keen to undertake long-term investment, they should partner with Chinese mainland institutions to introduce more new financial products, securities and long-term loans to fund the infrastructure projects, Chen said.

"I think somehow we have underestimated the importance of Qianhai in terms of our own financial development and our own role in the B&R Initiative," he said.

sophiehe@chinadailyhk.com

(HK Edition 12/08/2016 page8)