The Nanguan Mosque in Yinchuan, the capital of Ningxia Hui Autonomous Region, is the largest mosque in the province and has a distinctive Chinese-Arabic architectural mix. Ningxia wants to establish itself as an Islamic finance centre in China and along the New Silk Road.

By Arno Maierbrugger/Gulf Times Correspondent /Bangkok


With China showing growing interest to participate in the global Islamic finance market, the country is working on establishing hubs for Shariah banking within its borders. The first such centre to emerge will undoubtedly be the southern metropolis of Hong Kong which is very serious about becoming an East Asian hub for Islamic finance with a side glance on its regional competitor Singapore.
Following the successful placement of the Hong Kong government’s debut sukuk in September 2014 worth $1bn, the Hong Kong Monetary Authority announced plans in April this year to sell another $1bn of five-year sukuk, which would solidify its position as one or the region’s largest emerging Islamic finance centres.
In developing the Islamic finance market in China, the country is signalling its readiness to build up the industry not just for the sake of its own 20mn Muslim population, but also for cross-border deals and foreign Islamic investment especially into its envisaged 300 large new infrastructure projects approved in January 2015, worth a total of $1.1tn and set to be rolled out in the coming decade.
In this respect, China is drawing a lot of expertise from Gulf Cooperation Council (GCC) countries, namely Qatar. Qatar International Islamic Bank (QIIB) and QNB Capital just signed an agreement in April with Chongqing-based Southwest Securities to develop Shariah-compliant finance products in the country while it is also seeking access to investors primarily in Qatar and the Middle East. The partnership is further intended to help the Qatari lenders access the Chinese market in a more direct way. In case of the first Hong Kong sukuk, lenders such as National Bank of Abu Dhabi, Abu Dhabi Islamic Bank, Emirates NBD and QInvest were all involved.
In another development, Industrial and Commercial Bank of China – China’s biggest bank by assets –last week signed a deal with Jeddah-based Islamic Development Bank (IDB) to develop Shariah-compliant banking products not just in China, but in all of the IDB’s 52 member states.
But many eyes are also on China’s majority-Muslim autonomous province of Ningxia in the northwestern part of the country located along the historic silk trade route. Ningxia, where a third of the 6.5mn-population is Muslim, plans a $1.5bn debut sukuk sale as early as this year. The deal, managed by Nanchang-based AVIC Securities, will be China’s first local-government overseas bond issuance and the first Islamic bond issued by a province.
Ningxia, home to the Muslim Hui ethnic group, has in the past increasingly tried to boost trade and financial ties with the Muslim world, particularly with GCC investors and business partners, for its growing halal industry – a sector where Ningxia took the leading role in China –, infrastructure and Islamic finance. Just last month, a high-level delegation from Ningxia paid a visit to Qatar, Saudi Arabia and the UAE to investigate such business collaborations.
Most importantly, there are plans to gradually establish a “Ningxia Islamic Finance Centre” in the province’s capital Yinchuan over the coming years to facilitate financial cooperation between China and the Middle East, establish Islamic banks and banking products in China and develop a wholesale Islamic capital market, including Islamic bonds, equities and funds as an alternative to conventional finance products. Plans to launch the first Islamic bank on China’s soil are also ongoing in collaboration between Ningxia-based Bank of Shizuishan and Bank Muamalat Malaysia.
These developments would put Ningxia – which currently has the third-smallest GDP among China’s provinces – very visibly on the world map of the Islamic finance sector.