Financing China’s Silk Road plans: the Silk Road Fund

Part 2 of a series on China’s Silk Road. (For the Dutch version, see

China’s Silk Road strategy (One Belt, One Road, 一带 一路) is ambitious and costly. The construction of roads, railways, port facilities, commercial centers and energy infrastructure will require huge and long-term investments. China is willing to provide a big part of the necessary investment but hopes and expects that the countries along the Silk Road will also raise money. Many of these countries, however, are too poor to do so and the contribution of international institutions such as the Asian Development Bank (ADB), which also invests in connectivity in Central Asia via its ‘CAREC 2020‘ program, will remain limited. China has recently established two funds that will help the country realize its plans: the Silk Road Fund (丝路 基金) and the Energy Development Fund. (能源 发展 基金)

Today (02/16/2015) Chinese newspapers reported that the Silk Road Fund has already begun its work and that the first board meeting of the Fund took place on 6 January of this year. The fund aims to raise 40 billion US dollars, 65% of which will come from China’s foreign currency reserves. The remaining 35% will come from the sovereign wealth fund China Investment Corporation (CIC) and two policy banks: China’s Export-Import Bank and the China Development Bank. The Fund enjoys the  support of the Chinese government but here are still many uncertainties regarding its operation and there will be numerous challenges ahead. Previously established Chinese funds, such as the China-Africa Development Fund (CADF) and the China-ASEAN Fund, have encountered many problems. According to Chinese magazine Caixin, CADF and the China-ASEAN Fund have so far failed to raise the intended amount of money and have had difficulties to gain local authorities’ support for projects. As a result, Caixin writes, the China-ASEAN Fund has up till now raised only 1 billion instead of its goal of 10 billion US dollars and the CADF has invested less than half of the money it has under its management.

In a recent interview to the First Financial Daily 第一财经报 (published in the Chinese edition of the Global Times, 02/16/2015),  the Governor of China’s Central Bank, Zhou Xiaochuan, provided more insight into the operation of the Silk Road Fund. According to Zhou the Silk Road Fund is not a sovereign wealth fund but a private equity fund aimed at long-term investments. The fund is denominated in foreign currency and welcomes domestic and foreign investors. Zhou emphasized that the Silk Road Fund will not become a competitor to CIC, China’s Export-Import Bank and the China Development Bank, but will seek close cooperation. As was recently announced, the China Development Bank, will no longer function as a commercial bank but will return to its original function as a policy bank, which provides loans at the request of the government. This close cooperation with policy banks raises the question if the Silk Road Fund will be able to judge projects on the basis of commercial viability.

Zhou further indicated that the recruitment of good staff is one of the major challenges for the Silk Road Fund. The Central Bank has helped the fund getting established, says Zhou, but it now needs to function independently. Staff members should not only possess financial expertise but should also have knowledge of the political and economic situation in the countries in which the fund intends to invest. The staff should furthermore include people that speak a relevant foreign language. The search for talent will continue for some time but several key positions have now been filled. The Silk Road Fund is led by prominent economist Jin Qi, assistant of Central Bank Governor Zhou Xiaochuan. Jin is believed to have much relevant knowledge and experience. The same is said of Wang Yanzhi of the State Administration of Foreign Exchange (SAFE), who has been appointed as General Manager of the fund. A third appointment concerned Zhu Surong, who is the head of the Central Bank’s branch office in Xinjiang Uyghur Autonomous Region in Northwest China, as a member of the Board of Directors.

The question is whether the Silk Road Fund will be able to avoid the problems met by previously established Chinese funds but given the prestige involved in the Silk Road plans, the Chinese government will do everything possible to have the fund achieve its objectives.


ADB, ‘A Strategic Framework for the Central Asia Regional Economic Cooperation Program 2011–2020’ (2012),

周小川:丝路基金起航 不是中国版马歇尔计划 (Zhou Xiaochuan: the Silk Road Fund is not a  Chinese version of the Marshall Plan),

Zhang Yuzhe, ‘With New Funds, China Hits a Silk Road Stride’, Caixin (December 3, 2014),

Zhang Yuzhe, ‘CDB Told to Return to Policy Bank Role It Left Years Ago’, Caixin (February 3, 2015),

Zhang Yuzhe, ‘Gov’t Said to Name Three to Silk Road Fund Leadership Team’, Caixin (February 5, 2015)