DALIAN, Jun 23th (China Economic Net)-At the 2026 Annual Meeting of the New Champions of the World Economic Forum (Summer Davos), in the panel discussion “How Will the Belt and Road Develop in the Future?”, Liu Jun, President of Industrial and Commercial Bank of China (ICBC), outlined a set of pragmatic financing mechanisms aimed at restructuring cross-border infrastructure finance under the Belt and Road Initiative, with a particular emphasis on expanding the use of RMB-denominated funding channels and China-linked financial infrastructure.

Representing ICBC, Liu proposed that financing arrangements with partner countries should increasingly rely on the renminbi and China’s domestic capital markets, leveraging the public financial infrastructure already deployed across BRI economies. He noted that many participating developing economies face structurally lower sovereign credit ratings relative to advanced economies, resulting in persistently elevated financing costs. These costs, he emphasized, are compounded by currency conversion frictions, legal due diligence expenses, and inefficiencies in clearing and settlement systems.

Reducing Currency Intermediation Costs Through Direct FX Settlement

Liu’s first proposed mechanism involves expanding bilateral direct currency exchange arrangements to reduce reliance on the US dollar as an intermediary settlement currency. Under the prevailing structure, he observed, many BRI financing flows effectively require a two-step conversion—RMB to USD and then USD to local currency—introducing an additional layer of cost and exchange-rate exposure.

Citing Kazakhstan as an illustrative case, Liu described a financing structure combining RMB–tenge direct exchange with syndicated lending arrangements. According to his remarks, this structure reduced the effective financing cost from approximately 20 percent to 5.7 percent. In a parallel transaction, a three-year panda bond issuance for a Kazakh sovereign institution, with a coupon of 3.7 percent, achieved a reported all-in cost of 1.9 percent, implying an annual reduction of 200–300 basis points relative to conventional offshore financing channels.

Credit Enhancement Through Multilateral Guarantee Architecture

The second pillar of Liu’s framework emphasizes the coordinated use of credit enhancement mechanisms involving insurers, exporters’ credit agencies, and multilateral development banks. The objective, he noted, is to align financing costs more closely with the underlying commercial and logistical realities of infrastructure projects, rather than sovereign credit ratings alone.

Within this framework, Liu highlighted a Pakistan-related financing arrangement as a representative case. In this structure, the Asian Infrastructure Investment Bank (AIIB) and the Asian Development Bank (ADB) jointly provided credit enhancement support covering up to 95 percent of principal exposure. This unusually high guarantee ratio, rarely observed in emerging-market infrastructure finance, effectively mitigated credit risk associated with Pakistan’s sovereign rating constraints and materially reduced project financing costs.

Settlement Infrastructure and the Role of RMB Clearing Systems

On the settlement side, Liu emphasized the growing capacity of China’s cross-border payment infrastructure, particularly the Cross-Border Interbank Payment System (CIPS) and ICBC’s proprietary clearing systems. He stated that these systems are now capable of settlement within seconds between sovereign currencies, significantly reducing transaction latency and associated clearing costs.

Conclusion: Infrastructure Finance as Financial System Design

Liu concluded that expanding RMB usage, deepening integration with China’s capital markets, and leveraging existing public financial infrastructure in BRI economies can transform the initiative beyond physical infrastructure development. In his framing, the Belt and Road Initiative should be understood not only as a pathway for urbanization and industrialization in participating economies, but also as an evolving architecture for cross-border financial system design—one aimed at lowering structural financing costs and reshaping the currency composition of emerging-market infrastructure investment.