HNA Group Establishes $3.2 Billion Belt and Road Fund, Signalling Xi’s Grip On Private Capital

A division of HNA Group will set up a fund to invest in Belt and Road projects in Greater China and Southeast Asia, HNA announced on February 27.  The fund, managed by HNA Capital Group, is to invest in infrastructure and financial services projects. This adds to HNA Innovation Finance’s January announcement that it, too, will focus its activities on deals related to the Belt and Road Initiative. The development comes amidst intensifying controls placed by Beijing on what China’s overseas investors can and cannot do.  In that HNA is ostensibly a private firm, these announcements also stand out as a significant display of China’s willingness and ability to direct private capital towards the priority projects of leadership, such as the Belt and Road Initiative but also possibly other areas earmarked by the Xi administration.

Beginning in 2017, Chinese financial regulators brought in measures aimed at curbing what they called “irrational” investment. The measures placed restrictions on a number of HNA’s preferred targets, such as real estate, hotels, entertainment, and sports. The impact of the restrictions on HNA was clear. After a sharp rise in annual transaction values between 2015 and 2016, this number fell sharply in 2017.

HNA’s announcement also appears to be the latest step in the Chinese government’s drive to diversify funding for the Belt and Road Initiative beyond policy banks such as China Development Bank and the Export-Import Bank of China. In August 2017, it was reported that China’s “big four” commercial banks – Bank of China, China Construction Bank, Industrial and Commercial Bank of China, and Agricultural Bank of China – are also collectively aiming to develop Belt and Road funds capitalized with over $120 billion.

HNA Group is not the only private conglomerate to be cowed into supporting Xi’s pet projects. Dalian Wanda Group was once at the forefront of international soccer investment. Last week, amid political pressure to support the development of domestic soccer, Wanda sold its shares in Spanish club Atletico Madrid and repurposed the funds to support local club Dalian Yifang.