Like it? PLEASE +1 it! Thanks! Evan Signature
Evan Carmichael Top Header about About

III. B. State Financial Institutions: THE ROLE OF CHINA’S PUBLIC SECTOR

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
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

Related Articles

  What is a Microfinance Institution (MFI)?
  1.0 Introduction: Microfinance in Africa - Experience and Lessons from Selected African Countries
  2.2.4 National training systems: Contributory factors
  7.3.4 Labour market reform: Mainstreaming skills development for the poor
  3.1.2 Training for the formal sector: Training priorities, resources and reorientation
  What Drives China’s Growing Role in Africa?
  6.3 Financial sector links between investment and diversification: Economic Report on Africa 2007
  9.1 Women’s access to micro-finance and other forms of credit: Support for Growth-oriented Women Entrepreneurs in Tanzania, 2005
  Expanding the supply of finance through the non-financial private sector - Increasing SME Access to Finance: A Four Pronged Approach
  7.5.4 The role of public sector training institutions: Institutional design and capacity building
  SME Financing
  3.1.4 Overall resource availability: Training priorities, resources and reorientation
  Credit Information Bureau India
  7.4 Characteristics of a pro-poor training system
  5.3.5 Micro and small enterprises: Public sector training
  Overview IX: Economic Report on Africa 2007
  International Year of Microcredit Advisors Visit Kenya and Uganda: Princess Maxima, Diederik Laman Trip and Marilou van Golstein Brouwers Promote Microfinance on the Continent
  Lessons Learned
  6.6 Strengthening of institutions: Economic Report on Africa 2007

Home > African-Accounts > International Monetary Fund > III B State Financial Institutions THE ROLE OF CHINAS PUBLIC SECTOR >

Free PDF Download
References: Stock Market Development in Sub-Saharan Africa
By International Monetary Fund

About the Author: International Monetary Fund

RSS for International's articles - Visit International's website
The IMF is an international organization of 185 member countries. It was established to promote international monetary cooperation, exchange stability, and orderly exchange arrangements; to foster economic growth and high levels of employment; and to provide temporary financial assistance to countries to help ease balance of payments adjustment. Since the IMF was established its purposes have remained unchanged but its operations—which involve surveillance, financial assistance, and technical assistance—have developed to meet the changing needs of its member countries in an evolving world economy.
Click here to visit International's website.
Dashed Line

More from International Monetary Fund
21 The CommunityBased Approach in MFI Development Microfinance in Africa Experience and Lessons from Selected African Countries
What Drives Chinas Growing Role in Africa
III A Chinas African Policy and New Commitments for 200709 THE ROLE OF CHINAS PUBLIC SECTOR
41 Objectives and Coverage of the Regulatory Framework Microfinance in Africa Experience and Lessons from Selected African Countries

Related Forum Posts

Private Equity Needed Private Equity Needed
Re: Did you reach your goal this year? Re: Did you reach your goal this year?
Re: Did you reach your goal this year? Re: Did you reach your goal this year?
Re: Did you reach your goal this year? Re: Did you reach your goal this year?
Future Financial Corporation Future Financial Corporation

Share this article. Fund someone's dream.

Share this post and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.
Share for a Cause

By: Evan Carmichael

Like this page? PLEASE +1 it! Evan Signature


Subscriber Counter
  Supporters: Thank you Sharon Galor of Toronto Salsa Lessons / Classes for your suggestions to make the newsletter look like the website and profile younger entrepreneurs like Jennifer Lopez and Sean Combs! 
Connect with Evan google plus facebook Twitter YouTube Contact