CHINA BANKS LEND MORE THAN WORLD BANK

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, reports Chris Hogg
for BBC News from Shanghai
in China.

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The two Chinese banks do
not publish a detailed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.