Via IMF (Den Internationale Valutafond)

Belt and Road Initiative: Two Key Channels to Achieving Financial Connectivity

Opening Remarks
By Christine Lagarde, IMF Managing Director
Belt and Road Forum Session on Financial Connectivity

April 24, 2019

As prepared for delivery

Governor Yi, Minister Liu, Distinguished Guests, Ladies and Gentlemen —
good morning! Zao Shang Hao!

I would like to thank the People’s Bank of China and the Chinese Ministry
of Finance for organizing this important event.

As we meet during this beautiful springtime weather it brings to mind the
words of the Chinese proverb, “ The whole year must be planned for in the spring.”

Over the next three days we will consider the ways the Belt and Road
Initiative — the BRI—can help better connect the world physically and
financially for years to come. It is fitting that we begin these
conversations with financial connectivity. Why? Because history teaches us
that physical and financial connectivity go hand-in-hand.

Think of the original Silk Road. The desire for trade drove merchants to
travel thousands of kilometers. Over time, infrastructure in the form of
bridges, buildings, and even entire new cities were built to accommodate
what began as small trading posts and financial exchanges.

So where there is financial connection, we see that rapid improvements in
quality of life can quickly follow.

In our modern context, there are several important channels to achieving
this greater financial connectivity. I want to highlight two today:
increased capital mobility and increased financial inclusion.

Increased Capital Mobility

First, enabling capital to flow more freely.

Allowing capital to flow across borders can help support inclusive growth.
How? By enhancing investments in infrastructure, manufacturing, and even
health care.

Right now, foreign direct investmentFDI is only 1.9 percent of GDP in developing countries. Before
the global financial crisis, it was at 2.5 percent. Making progress on
major infrastructure needs will require capital flows to rise again and to
be managed safely.

Greater openness to capital flows can also bring down the cost of finance,
improve the efficiency of the financial sector, and allow capital to
support productive investments and new jobs.

That is certainly the case here in China, where a further opening of
the bond market to foreign investors will enable diversification and foster the internationalization of the Renminbi (RMB).

In fact, the IMF recently published a book on this topic, called “The
Future of China’s Bond Market”. It outlines how the inclusion of China’s
bonds in global indexes can be a gamechanger not only for China’s own
financial markets but also for global investors.

The book also underscores the challenges that come with opening up capital
markets. Thankfully, we know from experience the elements that are required
for success. These include sound financial regulation, transparent rules for investment, and

attention to fiscal sustainability.

On this last point, China’s increased focus on the long-term success of BRI
projects, and the announcement today by Finance Minister Liu of a BRI debt
sustainability framework, are very welcome steps in the right direction.

So too is the work that is now beginning to ensure that investment in BRI
projects is green, low-carbon and climate resilient. This will lead to
increased environmental sustainability.

2. Increased Financial Inclusion

We also need increased financial inclusion my second channel for a more effective BRI.

A few numbers: close to half of the adult popu­lation in low and
middle-income Asia-Pacific economies do not have a bank account
. Less than 10 percent have ever borrowed from a financial institution.

And yet, we know that closing the finance gap is an “economic
must-have” for nations to thrive in the 21st century. IMF
analysis shows that if the least financially inclusive countries in
Asia narrowed the finance gap to the level of Thailand — an emerging
market economy —

the poverty rate in those countries could be reduced by nearly 4


How can we get there? In part, through policies that enable more women
and rural citizens to access financial services.

The financial gender gap for women in developing countries is about
9 percent

and has remained largely unchanged since 2011.

There is no silver bullet, but we know that fintech can play a catalyzing role.

In Cambodia, for example, strong public-private partnerships in supporting
mobile finance has led to a tripling in the number of micro-financial
institutions since 2011. These institutions have now provided loans to over
2 million new borrowers, representing nearly 20 percent of the adult
population. Many of these citizens had never had a bank account. Now they
can save for the future and perhaps even start a business of their own.

These are ideas that can work everywhere. But countries have to be willing
to partner and learn from each other.

That is one of the major reasons why last October, the IMF and World
Bank launched the Bali Fintech Agenda.

The agenda lays out key principles — from developing financial markets to
safeguarding financial integrity — that can help each nation as it strives
for greater financial inclusion.

It is a model for international collaboration, much like this forum.


Let me conclude.

I began with a Chinese proverb. In the spirit of global connections, I will
close with a western poet. The English poet John Donne, who wrote about the
Silk Road, was right when he said, “No man (or woman!)

is an island, entire of itself; every man is a piece of the continent,
a part of the main

Just like our history, our modern financial landscape reveals the enormous
potential of better connections between nations and between financial
institutions across borders. These financial connections can lead to new
construction, new jobs, new opportunities, and, ultimately, the ability to
achieve economic security.

If we find ways to harness the potential, we can build more prosperous,
inclusive economies that benefit all.

Thank you very much. Xièxiè.


International Monetary Fund, 2018 , Financial Inclusion in Asia-Pacific, Asia-Pacific
Departmental Paper No, 18/17, Washington, D.C.


International Monetary Fund, 2018 , Financial Inclusion in Asia-Pacific, Asia-Pacific
Departmental Paper No, 18/17, Washington, D.C.


World Bank, The 2017 Global Findex Database, Washington


John Donne, Devotions upon Emergent Occasions. Originally
published in 1624.

IMF Communications Department

Phone: +1 202 623-7100Email:

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