China banks lend more than World Bank - report

BBC, 18 January 2011
China banks lend more than World Bank - report
By Chris Hogg, BBC News, Shanghai, China

Two Chinese state controlled banks have lent more to developing
countries than the World Bank, according to a report.

The China Development Bank and the China Export Import Bank offered
loans of at least $110 bn (�69.2 bn) to governments and firms in
developing countries in 2009 and 2010.

The research was undertaken by the Financial Times newspaper.

Between mid-2008 and mid-2010, the World Bank's lending arm issued loans
of just over $100bn (�63bn).

The two Chinese banks do not publish a detailed breakdown of their
overseas loans, so this research is based on public announcements about
specific deals from them, their borrowers or the Chinese government.

That means the figure arrived at for the amount of Chinese lending is
more likely an underestimate than an overestimate because some - more
sensitive - loans will not have been made public.

The Chinese lenders are so-called policy banks - they have a mandate to
further whatever Beijing sees as its national interest.

One of China Development Bank's specific tasks is to try to alleviate
and, where possible, eliminate bottlenecks in supplies of raw materials
or land for China's economy.

It also tries to open up foreign markets for Chinese companies.

The period looked at by the researchers included the worst of the global
financial crisis.

Chinese banks were offering loans to producers of raw materials at a
time when it was hard for them to attract financing from elsewhere.

That helped secure long-term energy deals, including oil supplies from
Russia, Venezuela and Brazil.

The Chinese government, which is sitting on $2 trillion (�1.26 trillion)
of foreign exchange reserves, has ample amounts of cash to fund loans
which help promote its strategic objectives.

But what is interesting is that in the private sector, it is a different
story.

Outward Foreign Direct Investment (FDI) by Chinese companies (not
including banks) was around $50bn (�31.5bn) last year - around half the
FDI that flowed from foreign companies into China.

This is the world's second-largest economy but its outward flow of FDI
is just the fifth largest in the world.

That suggests that Chinese companies still do not have the confidence to
make big acquisitions overseas in order to grow, or of course that they
are unable to.

What does not help is the sometimes murky relationship between the
government and some of the country's biggest firms which can make the
targets of such acquisitions or potential merger partners nervous about
doing deals with the Chinese.
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