Province once more in spotlight because of its strategic location

Eager to enhance its earning strength, the Gansu Provincial Highway Aviation Tourism Investment Group Co, or GHATG will issue a second round of bonds in United States dollars in European markets in the second half of this year.

Based in Lanzhou, capital of Gansu province, the company - the largest State-owned enterprise in the province by asset volume-plans to sell the bonds to investors in major European economies including the United Kingdom, Germany and France between June and December this year.

Shi Peirong, chairman of GHATG, said the company has been planning this for a long time. The money will be used to build highways, roads, airports and other infrastructure facilities within the province.

It audaciously released $500 million (446 million euros; ￡389 million) in bonds to the global market in November 2016, part of major move by Gansu to echo the country's call to participate in the Belt and Road Initiative.

It was the first time an SOE in Gansu had released bonds in an overseas market, as the inland province took proactive action to participate in the global game. The deal was coordinated and completed by Bank of China and London-headquartered Barclays Bank.

For a credit rating agencies, the group opted for Standard & Poor's and Fitch Rating, as those have long been widely recognized as independent international rating institutions.

"Even though the economic growth pace of the United States, Japan and Europe has slowed for several years, the company's bonds were favored by international investors, including BlackRock Inc and HSBC Global Asset Management," Shi said.

"The final orders we received were fourfold what we expected, while 94 percent of our investors were from Asia and the rest were from Europe, the Middle East and Africa."

The bond's 3 percent interest rate was lower than the average bond issued in the domestic market. It not only raised the fame of Gansu in the global capital market but also set an example in the home market for using overseas bonds for big-ticket infrastructure projects.

"Big-ticket infrastructure projects supported by the second round of bonds will further facilitate Gansu's exports of agricultural, heavy industry and new energy products to global markets via a better developed transportation network," Shi says. "This will also create more jobs in the service-related sectors in the long term."

Tang Renjian, governor of Gansu province, says the successful sale of bonds has revealed a lot about the perception of the Chinese economy. The stability and the potential of the Belt and Road Initiative is widely acknowledged by global investors.

"The growing trade opportunities, tourism resources and industrial upgrading boom of western China will further attract investment," Tang says. "It also showed that Gansu has cultivated a number of outstanding companies, which are ready to accept the challenge from the global capital market."

Insufficient infrastructure in transport has been one the main barriers to Gansu's economic growth. The provincial government released its action plan to achieve a breakthrough in its transport network building in 2015.

According to the plan, a total of 800 billion yuan ($116 billion; 104 billion euros; ￡91 billion) is expected to be invested in infrastructure, including 67,000 kilometers of highway and 3,400 kilometers of railway.

The plan is thought to solve the transport problem once and for all, and lay a foundation for better communication along the Silk Road Economic Belt.

The provincial government therefore was given permission to allow GHATG to step in and take over highway development, including financing, investment, building and management.

"Gansu has long been a stronghold on the ancient Silk Road. It connects East and West and provides an important path for cultural and economic exchanges," said Wang Zhipeng, a professor of regional economy at Beijing Jiaotong University. "However, the development of this once-flourishing inland province has slowed because of its climate, environment and industrial structure."

Wang said that under the national call to develop markets related to the Belt and Road Initiative, Gansu has again been put under the spotlight, thank to its strategic location.

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(China Daily European Weekly 06/09/2017 page26)