Panda bond financing of the Belt and Road Initiative: An analysis of monetary mechanisms and financial risks
Jiajun Xu and
Research in International Business and Finance, 2022, vol. 61, issue C
We examine the role of China Development Bank (CDB) in the Panda bond financing of the Belt & Road Initiative (BRI). We investigate the monetary mechanisms and the financial risks involved in the Panda bond financing of the BRI, especially exchange rate risks and balance of payment crisis risks. Our main findings are that the CDB may reduce its financial risks by acting as an underwriter of the Panda bonds rather than as the direct financer, but it may also have to act as a dealer of last resort. To reduce the risks of both the exchange rate and balance of payment crisis of the Panda bonds, it is important that the real investment projects are export-enhancing for host countries (generate foreign currency) and that the construction and execution of the real investment projects uses local suppliers based in host countries.
Keywords: Belt & Road Initiative; Panda bonds; China development bank; Financial risks; Exchange rate risks; Balance of payment crisis (search for similar items in EconPapers)
JEL-codes: E42 F21 F31 F32 G15 O18 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:61:y:2022:i:c:s0275531922000502
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