The crucial role Islamic finance is set to play in financing China’s Belt and Road Initiative (BRI) pays homage to the once great Silk Road and symbiotic relationship between China and the Islamic world prior the 15th Century. Rightfully so, as BRI is the 21st Century’s New Silk Road.
BRI, which was formally known as One Belt, One Road (OBOR), is unprecedented in its infrastructure endeavours, sovereign states involved, and financing required to achieve the ambitious plan. To the extent that in certain countries, the infrastructure boost acquired through this venture has never occurred in their history, before or after their independence. Introduced in 2013 by President of the Republic of China, Xi Jinping, BRI consists of overland roads and railway systems – The Belt – and maritime highways – The Road. It allows the seamless and efficient transportation of people, natural resources, products, and capital to flow to and from mainland China.
In the true essence of globalisation, it interconnects over 65 countries, subsequently benefits over half of the globe's population, and will contribute positively to the 25% of global Gross Domestic Product (GDP) which already exists in this region. The new Silk Road will predominately extend itself from North Africa, Eastern Europe, South East Asia, and Oceania. It is providing the necessary infrastructure of maritime ports, tunnels, bridges, roads, railways, and, power stations.
The sheer magnitude of BRI, taking away the physical task of construction and coordination, finds itself in its financing. Chinese state-owned banks; the bank of China and China Construction Bank. Sovereign finance institutions; the Silk Road Fund and Russian Direct Investment Fund. Bilateral funds; China-Russia RMB Cooperation Fund and China-Africa Investment Fund. As well as Multilateral financial institutions such as the World Bank, [BRICS] New Development Bank and the European Bank for Re-Construction & Development Fund. Which barely illustrates the total amount of investors involved, still does not cover the capital required. In addition to, for the first time, Vice Chairman and President of the China Investment Corporation (CIC), Tu Guangshao, announced in March 2019 the opportunity for global partners to be a part of BRI.
However, a crucial role exists for Islamic financial institutions due to the emerging market of the Middle East, Africa, and South-Asia (MEASA). Situated at the heart of BRI, the Dubai International Financial Centre (DIDC) is the financial hub of this region. A strategic, willing, and beneficial partner for BRI, with four of China’s banks having branches situated here, along with 4000 Chinese companies who have settled. So far that Jiang Xiheng, Vice President at the China Center for International Knowledge on Development (CIKD), stated the importance and great potential it is having the United Arab Emirates (UAE) as a partner in BRI.
Considering that close to half of the countries involved in BRI are majority Islamic, China being UAE’s biggest trading partner, the principles of Islamic finance being in line with Chinese Culture. Its geopolitical positioning and the long-standing relationship China had with the Islamic world in the former Silk Road. Islamic finance institutions will undoubtedly serve a crucial role for BRI.