"Transforming Western China Through Financial Connectivity" - Keynote Address by Mr Ravi Menon, Managing Director, Monetary Authority of Singapore, at the China-Singapore (Chongqing) Connectivity Initiative (CCI) Financial Summit 2019 on 4 November 2019
Mr Ong Ye Kung, Minister for Education and MAS Board Member,
Distinguished guests, ladies and gentlemen, good afternoon.
- You have made us feel at home with your warm hospitality and efficient arrangements.
- You have also shown great vision by expanding since last year the focus of this Summit from just being between Chongqing and Singapore, to the Western Region of China and ASEAN – with Chongqing and Singapore playing key roles as connectors between these two regions.
- I am delighted to see so many guests from Western China and ASEAN gathered here today.
- Finance is one of the four key pillars under the CCI.
- The goal of the Finance Pillar is to facilitate the economic transformation of Western China through greater connectivity and innovation in financial services.
- cross-border financing and investment; and
- the CCI International Land Sea Trade Corridor
- From 2015 to the middle of this year, we have seen more than 100 cross-border financing deals, raising nearly US$11 billion in aggregate.
- Nearly US$4 billion of the financing raised was for corporates from the other Western provinces, demonstrating that the CCI Finance Pillar is benefitting the broader Western Region.
- Last year, we also saw the first REIT structure with underlying properties from the Western Region listed in Singapore, raising US$322 million.
- As of July 2019, the average cost of financing through the CCI for Chongqing corporates was 1.4 percentage points lower than the city’s average loan rate.
- Indeed, President Xi Jinping has recognised the ILSTC as an important intersection between the “Belt” and the “Road” which can connect Europe, Central Asia and ASEAN through Belt and Road projects to China’s Yangtze River Economic Belt.
- This substantial savings in time has already translated to a significant increase in trade along the ILSTC.
- Rail volumes via the ILSTC have grown by around 20 times in the past two years.
- This includes last mile connectivity within China and with ASEAN, including with Belt and Road Initiative (“BRI”) projects.
- We need more open and facilitative cross border financing channels.
- We used to have a dedicated foreign debt quota under the CCI to expedite the approvals and enable corporates and financial institutions to take advantage of favourable offshore financing conditions in a timely manner. This quota has since been exhausted.
- This is an important milestone in the digitalisation of the ILSTC.
- Data from either Customs authority can be re-used by the other country’s authority, helping to reduce clearance times.
- Businesses will benefit from a seamless and more efficient declaration process.
- The Singapore and Chinese Customs administrations are now working towards carrying out pilot trials between Chongqing and Singapore.
- The panel sessions tomorrow will touch on these areas in more detail.
- Their discussions will provide valuable inputs in planning for a comprehensive approach to supporting trade on the ILSTC.
- Climate change is the foremost environmental issue facing the world today.
- It is in need of urgent collective action and there is much that the Western Region and ASEAN can do together.
- Disaster risk financing and insurance to protect infrastructure from climate change; and
- Green finance to encourage sustainable business practices.
- The severity and frequency of these natural catastrophes will worsen with climate change.
- Like ASEAN, Western China is under-insured against such risks.
- This will allow China to diversify outside of China its domestic catastrophe exposures, and lower the amount of catastrophe exposure Chinese reinsurers hold at home.
- MAS has introduced a ILS grant scheme which helps issuers defray costs associated with issuing an ILS in Singapore.
- Under the fast-track application scheme, straightforward classic structure deals could be processed within 8 weeks of application.
- Our universities can engage in gathering natural disaster data in the Western Region that will support the structuring, modelling, and securitisation of ILS transactions.
- For example, China has estimated that it will require US$450-600 billion of investment annually, to achieve its green policy goals under its 13th Five Year Plan.
- ASEAN will need an estimated US$200 billion in green investment annually until 2030, according to a study by the United Nations Environmental Programme and DBS Bank.
- China has made significant advances in laying the necessary foundation to support green financing.
- I understand that President Xi Jinping has tasked Chongqing to be “a leader” of green development along the Yangtze River Economic Belt.
- ICBC Singapore issued in April this year, its first green bond offering in three currencies totalling US$2.2 billion.
- We look forward to more Chinese financial institutions and corporates doing the same.
- MAS has introduced a Sustainable Bond Grant scheme.
- Corporates issuing green bonds in Singapore can apply for this grant, which aims to offset the additional costs borne by green bond issuers to ascertain their green status.
- The Agricultural Bank of China raised a US$200 million green loan in Singapore just two months ago.
- Like their Chinese counterparts, Singapore financial institutions have embarked on green initiatives and collaborations to advance projects and investment opportunities under the BRI.
- DBS Bank is one of the 27 institutions that signed up to the Green Investment Principles for the BRI at the 2019 BRI Forum.
- ASEAN has developed the ASEAN Green Bond Standards - common standards that can be applied across ASEAN.
- ASEAN participants will discuss tomorrow developments in green financing in their countries.
- The CCI Finance Pillar has achieved significant milestones over the past four years.
- Our financial collaboration will continue to deepen and broaden as we cooperate in both old and new frontiers.
- The panel sessions tomorrow are a good start to exploring further connectivity between the Western Region and ASEAN.
- I challenge all participants to look for new opportunities during these sessions to advance the economic development of the Western Region and ASEAN.
Opening Remarks by Mr Ravi Menon, Managing Director of MAS, at the 25th Anniversary Celebration of IMF-Singapore Regional Training Institute
The partnership will focus on finding ways to better mobilise financing to make digital services more affordable and accessible for underserved individuals and communities, and MSMEs, with the support of financial institutions and FinTech companies.
Mr Ravi Menon, Managing Director, MAS, spoke on MAS' efforts to build three foundational digital infrastructures, as well as MAS’ collaboration with UNDP to maximise opportunities for MSMEs.