On December 14, London-based European Bank of Reconstruction and Development (EBRD) accepted China as a member and would join 64 other shareholders from advanced and developing nations.

The EBRD was founded in 1991 and serves as a finance channel for major infrastructure projects in Europe and elsewhere.

ChannelNewsAsia quotes a press release as saying, "China's membership of the EBRD will open up significant further opportunities by Chinese groups in the regions where EBRD works."

The EBRD oversees development projects in 36 countries. Meanwhile, China-initiated Asian Infrastructure Investment Bank (AIIB) is scheduled to start operations at the end of this year. The two banks could join hands to upgrade logistics networks that boost trade and finance throughout Asia, Europe, Middle East and Africa.

Financing ‘New Silk Road’

In 2013, Chinese President Xi Jinping introduced the ‘Belt & Road’ initiative, otherwise known as ‘New Silk Road.’ The "Silk Road Economic Belt" and "21st Maritime Silk Road" would support infrastructure construction that include roads, railways and airports, along with industrial parks, ports and land-based trading hubs to expand economic corridors.

The ‘Belt & Road’ covers the regions of China, Asia, Eurasia, Middle East, Europe and Africa. Beijing has launched the 40bn U.S. dollars Silk Road Fund. The AIIB and EBRD can coordinate on accessing new finance channels.

"What I’d really like to achieve by next year, when the AIIB is running, is to have at least two or three co-finance projects," EBRD President Suma Chakrabarti told China Daily. "That's going to be our main push. Of course, we can do other things together, but projects would be a good way to start."

Beijing would rely more on EBRD to invest in Europe.

RMB gets big boost

The Chinese currency remninbi (RMB) would likely become a major beneficiary of EBRD financing. The International Monetary Fund (IMF) has accepted the RMB to join its Special Drawing Rights (SDR) basket of reserve currency and will officially enter into it next October.

The RMB is transforming into a powerhouse currency for global traders and investors doing cross-border business with Chinese companies. The EBRD would make it easier for enterprises to transfer RMB funds into designated infrastructure projects.

Additionally, Beijing has pledged to offer "preferential treatment" for companies that "utilize ‘China Made’ equipment and products" when they engage in New Silk Road projects, via the EBRD, according to Xinhua.

Meeting EU standards

Beijing joining the EBRD may not be a big deal, but it has a deeper meaning. The EU is recognized for enforcing stringent economic regulations. Such restrictions do curtail rapid economic growth, but when companies comply with EU rules, they meet the world’s highest standards.

The AIIB intends to act as a global player to fund infrastructure on behalf of the ‘Belt & Road.’ The AIIB can gain valuable experiences and insights from the EBRD when opening finance channels in Europe.

The EU regions still has areas of opportunities for Chinese investors. Central and Eastern Europe (CEE) countries have enjoyed remarkable economic development in the past few years, and experts forecast them to maintain high GDP (gross domestic product) growth rates for the long-term.

AIIB + EBRD = Stronger ‘Belt & Road’

Beijing is making a bold move to introduce the ‘Belt and Road.’ It's a costly venture, but holds the potential of substantial benefits for regional trade and transportation networks.

The New Silk Road can transform the emerging markets into major players of the global economy. The EBRD is making the right move to welcome China to its elite club.

(from Xinhua)