China's State-Run Companies Say Belt-Road Risks Are Controllable

(Bloomberg) -- China's chief regulator for state-owned enterprises said they can manage political and security risks associated with investing in countries in the Belt and Road Initiative.

The risks are "completely controllable," Xiao Yaqing, chairman of the State-Owned Assets Supervision and Administration Commission, told reporters Monday at a briefing in Beijing.

President Xi Jinping's initiative to spur greater economic integration with Eurasia and Africa runs through several geopolitical hot spots. The overland "belt" includes Central Asian nations, Pakistan, Iran and Turkey, while the maritime "road" passes through the Gulf of Aden off Yemen and the Horn of Africa, where China has conducted anti-piracy operations.

Xiao said state-run companies have learned about dealing with local regulations and customs from previous experiences with foreign operations, and they will conduct risk assessments on overseas investments with third parties or international bodies to help reduce threats.

Xi, who proposed the initiative in 2013, will convene a May 14-15 Belt and Road summit in Beijing, hosting 28 heads of state including Russian President Vladimir Putin and Pakistani Prime Minister Nawaz Sharif. Credit Suisse Group AG estimates the plan could funnel investments worth as much as $502 billion into 62 countries over five years.

Read More: Credit Suisse Says Belt-Road Plan May Top $500 Billion

Xiao briefed reporters along with executives from six of the largest SOEs, including China Mobile Ltd, State Grid Corp. of China, and China National Petroleum Corp. They outlined investment priorities and pledged to enhance corporate social responsibility along the route.

China Communication Construction Co. Chairman Liu Qitao highlighted the dangers associated with Belt and Road investments, telling reporters that 88 Chinese workers died during construction of a road connecting the country with Gwadar Port in Pakistan.

CNPC, the parent company of PetroChina Co., the nation's largest energy producer, pledged separately in a press release Monday that it will prioritize cooperation with Central Asia and Russia, as well as to expand cooperation with Iraq, Iran, and other resource-rich gulf nations. China Mobile, the world's largest wireless carrier, released a statement saying it will press ahead with optical cable projects with Myanmar, Nepal, Pakistan and Kyrgyzstan.

Executives highlighted opportunities for the initiative to spread Chinese technologies. China Mobile Chairman Shang Bing said it can promote the country's 4G standard TD-LTE, and State Grid Chairman Shu Yinbiao said it's a "clear impetus" to help take Chinese standards global.

Xiao said Belt and Road investments would be a major priority for Chinese companies as part of the 13th Five Year Plan, and emphasized that finance would follow market principles.

To contact Bloomberg News staff for this story: Peter Martin in Beijing at pmartin138@bloomberg.net.

To contact the editors responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net, Jeff Kearns, Enda Curran

With assistance from Peter Martin