III. B. State Financial Institutions: THE ROLE OF CHINA’S PUBLIC SECTOR
III. B. State Financial Institutions: THE ROLE OF CHINA’S PUBLIC SECTOR
Development Bank (CDB) are the two primary agencies implementing China’s new pledge
to Africa; the former is responsible for the preferential credit component (US$5 billion) and
the latter for the FDI support fund (US$5 billion).
China Exim Bank
Founded in 1994, China Exim bank is wholly owned by the state and operates under the
guidance of the central government. It is the sole bank handling Chinese government
concessional loans.21 Together with China Development Bank (CDB) and China Agriculture
Development Bank, the Exim Bank is tasked to promote exports and foreign investment. Its
export credits focus on infrastructure (roads, power plants, oil and gas pipelines,
telecommunications, and water projects); its investment loans target the energy, mining, and
industrial sectors. The bank’s main source of funding is the bond market. Unlike export
credit agencies in other countries, the government does not guarantee the bank’s liabilities.
China Exim Bank’s business (excluding concessional loans) almost quadrupled in 2001–06
(Figure 8). Available data suggest that China Exim Bank’s primary commercial operations in
2006 were larger than those of comparable institutions in major industrial countries, such as
the U.S. Exim Bank and the Japan Bank for International Cooperation (Figure 9).22 Because
China Exim Bank’s main business is commercial lending, the impact of its lending activities,
which include both commercial and concessional loans, in Africa therefore is far larger than
providing preferential credits on behalf of the government.
China Exim Bank has made efforts to enhance its collaboration with multilateral, bilateral,
and private lending institutions active in Africa. In May 2007, it signed a memorandum of
understanding with the World Bank to improve cooperation, beginning with road and energy
projects.
China Development Bank
Since CDB was established in 1994, its main mission has been to build China’s infrastructure
(national highway and rail networks, gas pipelines, water projects, and power plants); vital
economic sectors (petroleum-chemical refining, telecommunications); and the western
provinces. It also gives loans to Chinese businesses as part of the national Going Global
strategy, which makes CDB China’s most important bank in this regard. More recently, CDB
has launched the China-Africa Development Fund, in line with the government’s pledge, to
support Chinese FDI in Africa through equity participation as well as other means.
In 2006 CDB had a balance sheet of 2.3 trillion yuan, about US$290 billion. Its business has
grown rapidly; outstanding loans more than doubled between 2002 and 2006. CDB provides
loans in both yuan and foreign currencies. Short-term loans are used to fill client financing
needs before medium- and long-term loan contracts are completed. CDB’s main source of
funding is the bond market. Like China Exim Bank, it enjoys the same credit rating as
China’s sovereign ratings.
China Export and Credit Insurance Corporation (SINOSURE)
SINOSURE started operations in 2001. Its goal is to support Chinese exports and investment
abroad by insuring against buyer and country risks, such as foreign exchange restrictions,
expropriation, nationalization, and war. In 2006 the volume of new business reached
US$29.4 billion, up from just US$2.8 billion in 2002 (Table 3). Although only 3 percent of
its short-term insurance was for Africa in 2006, Africa accounted for near 30 percent of
SINOSURE’s medium- and long-term business, second only to Asia (Figure 10).
Other State Entities
China’s “big four” (Industrial and Commercial Bank, Bank of China, Construction Bank, and
Agriculture Bank) and other commercial banks command most of the country’s financial
savings. Because these banks compete in the credit market, some of their lending may affect
the foreign trade and investment of Chinese enterprises. Also, many enterprises and financial
institutions supported by provincial and local governments are active in Africa-related
business. Their operations are not necessarily coordinated.
IMF Working Paper
African Department
What Drives China’s Growing Role in Africa?
Prepared by Jian-Ye Wang
October 2007
III B State Financial Institutions THE ROLE OF CHINAS PUBLIC SECTOR - To learn more about this author, visit International Monetary Fund's Website.
Like this article? Share it with your friends
Among the large number of state-owned financial institutions, China Exim Bank and China
Development Bank (CDB) are the two primary agencies implementing China’s new pledge
to Africa; the former is responsible for the preferential credit component (US$5 billion) and
the latter for the FDI support fund (US$5 billion).
China Exim Bank
Founded in 1994, China Exim bank is wholly owned by the state and operates under the
guidance of the central government. It is the sole bank handling Chinese government
concessional loans.21 Together with China Development Bank (CDB) and China Agriculture
Development Bank, the Exim Bank is tasked to promote exports and foreign investment. Its
export credits focus on infrastructure (roads, power plants, oil and gas pipelines,
telecommunications, and water projects); its investment loans target the energy, mining, and
industrial sectors. The bank’s main source of funding is the bond market. Unlike export
credit agencies in other countries, the government does not guarantee the bank’s liabilities.
China Exim Bank’s business (excluding concessional loans) almost quadrupled in 2001–06
(Figure 8). Available data suggest that China Exim Bank’s primary commercial operations in
2006 were larger than those of comparable institutions in major industrial countries, such as
the U.S. Exim Bank and the Japan Bank for International Cooperation (Figure 9).22 Because
China Exim Bank’s main business is commercial lending, the impact of its lending activities,
which include both commercial and concessional loans, in Africa therefore is far larger than
providing preferential credits on behalf of the government.
China Exim Bank has made efforts to enhance its collaboration with multilateral, bilateral,
and private lending institutions active in Africa. In May 2007, it signed a memorandum of
understanding with the World Bank to improve cooperation, beginning with road and energy
projects.
China Development Bank
Since CDB was established in 1994, its main mission has been to build China’s infrastructure
(national highway and rail networks, gas pipelines, water projects, and power plants); vital
economic sectors (petroleum-chemical refining, telecommunications); and the western
provinces. It also gives loans to Chinese businesses as part of the national Going Global
strategy, which makes CDB China’s most important bank in this regard. More recently, CDB
has launched the China-Africa Development Fund, in line with the government’s pledge, to
support Chinese FDI in Africa through equity participation as well as other means.
In 2006 CDB had a balance sheet of 2.3 trillion yuan, about US$290 billion. Its business has
grown rapidly; outstanding loans more than doubled between 2002 and 2006. CDB provides
loans in both yuan and foreign currencies. Short-term loans are used to fill client financing
needs before medium- and long-term loan contracts are completed. CDB’s main source of
funding is the bond market. Like China Exim Bank, it enjoys the same credit rating as
China’s sovereign ratings.
China Export and Credit Insurance Corporation (SINOSURE)
SINOSURE started operations in 2001. Its goal is to support Chinese exports and investment
abroad by insuring against buyer and country risks, such as foreign exchange restrictions,
expropriation, nationalization, and war. In 2006 the volume of new business reached
US$29.4 billion, up from just US$2.8 billion in 2002 (Table 3). Although only 3 percent of
its short-term insurance was for Africa in 2006, Africa accounted for near 30 percent of
SINOSURE’s medium- and long-term business, second only to Asia (Figure 10).
Other State Entities
China’s “big four” (Industrial and Commercial Bank, Bank of China, Construction Bank, and
Agriculture Bank) and other commercial banks command most of the country’s financial
savings. Because these banks compete in the credit market, some of their lending may affect
the foreign trade and investment of Chinese enterprises. Also, many enterprises and financial
institutions supported by provincial and local governments are active in Africa-related
business. Their operations are not necessarily coordinated.
IMF Working Paper
African Department
What Drives China’s Growing Role in Africa?
Prepared by Jian-Ye Wang
October 2007
III B State Financial Institutions THE ROLE OF CHINAS PUBLIC SECTOR - To learn more about this author, visit International Monetary Fund's Website.
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David BarrDavid Barr is the President of Venture Opportunities, Inc. David has been a professional business broker/intermediary since 1980 focusing on General Business Brokerage and Mergers and Acquisitions representing client transaction value from $400,000 to $20,000,000. Mr. Barr has handled the sale of over four hundred and fifty companies. David earned a university degree from the State University of New York majoring in economics and business. David holds the Mergers and Acquisition Master Intermediary and the Certified Business Intermediary designations from the International Business Brokers Association. He is also a Senior Business Analyst and a Texas licensed Real Estate Agent. For more information about David and Venture Opportunities, visit www.bizdealmaker.com. - Visit David Barr's Website |
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