China Development Bank (CDB) is a policy bank of China under the State Council. Established in 1994,it has been described as the engine that powers the national government's economic development policies.[2][3] It has raised funds for numerous large-scale infrastructure projects,including the Three Gorges Dam and the Shanghai Pudong International Airport.
The bank is the second-largest bond issuer in China after the Ministry of Finance. In 2009,it accounted for about a quarter of the country's yuan bonds and is the biggest foreign-currency lender. CDB debt is owned by local banks and treated as a risk-free asset under the proposed People's Republic of China capital adequacy rules (i.e. the same treatment as PRC government bonds).[3]
The China Development Bank (CDB) was established in 1994 to provide development-oriented financing for high-priority government projects,particularly major infrastructure and projects that raise quality of life.[4]:209 It is under the direct jurisdiction of the State Council and the People's Central Government. At present,it has 35 branches across the country and one representative office.
The main objective as a state financial institution is to support the macroeconomic policies of the central government and to support national economic development and strategic structural changes in the economy.[5] The bank provides financing for national projects such as infrastructure development,basic industries,energy,and transportation.[6] Most of CDB's loans are for domestic projects,and it began lending for projects abroad in the early 2000s.[7]:41
From 1994 to 1998,CDB's fundraising was subject to a higher degree of state control than in later periods.[7]:32 In the 1990s,CDB facilitated the creation of China's interbank bond market.[7]:9 Initially,the People's Bank of China (PBOC) required domestic financial institutions such as commercial banks to buy policy bank bonds.[7]:32 At this stage,the PBOC usually set high yields and did not permit the apportioned bonds to be sold on the secondary market.[7]:33 In February 1996,CDB began its first overseas bond issuance in Japan,followed a year later by an issuance in the United States.[7]:34 Overseas issuance helped CDB diversify its funding sources.[7]:34 Ultimately,the issuance of bonds allowed CDB to become a financially independent bank without the state's tax revenues.[7]:9
In April 1998,former PBOC deputy governor Chen Yuan,the eldest son of Chen Yun,was appointed CDB's governor.[7]:34[8]:63 Chen implemented reforms designed to increase CDB's autonomy by reducing state involvement in CDB's fundraising and lending.[7]:34
From 1998 to 2008,CDB increased its fundraising autonomy and used an auction-based bond issuance mechanism to raise its funds.[7]:32 In 1999,CDB offered China's first floating rate bond.[7]:35
CDB plays a major role in alleviating infrastructure and energy bottlenecks in the Chinese economy. In 2003,CDB made loan arrangements for,or evaluated and underwrote,a total of 460 national debt projects and issued 246.8 billion yuan in loans. This accounted for 41% of its total investment. CDB's loans to the "bottleneck" investments that the government prioritizes amounted to 91% of its total loan count. It also issued a total of 357.5 billion yuan in loans to western areas and more than 174.2 billion yuan to old industrial bases in Northeast China. These loans substantially increased the economic growth and structural readjustments of the Chinese economy.[9]
In 2005 and 2006,CDB successfully issued two pilot Asset-Backed Securities[10] (ABS) products in the domestic China market. Along with other ABS products issued by China Construction Bank,CDB has created a foundation for a promising debt capital and structured finance market.[11][12]
China and Venezuela established the China-Venezuela Joint Fund in 2007,with the goal of offering capital funding for infrastructure projects in Venezuela which can be performed by Chinese companies.[7]:98–99 CDB lent $4 billion to the fund and the Venezuelan Economic and Social Development Bank (BANDES) contributed $2 billion.[7]:98
As part of China's response to the 2008 global financial crisis,emphasis on CDB's policy aspects increased and the state formalized its credit guarantee for CDB.[7]:32 CDB was one of the financial agencies implementing China's stimulus plan and vastly increased its lending for infrastructure and industrial projects.[7]:37–38
From 2009 to 2019,CDB has issued 1.6 trillion yuan in loans to more than 4,000 projects involving infrastructure,communications,transportation,and basic industries. The investments are spread along the Yellow River,and both south and north of the Yangtze River. CDB has been increasingly focusing on developing the western and northwestern provinces in China. This could help reduce the growing economic disparity in the western provinces,and it has the potential to revitalize the old industrial bases of northeast China.[13]
In 2010,CDB provided $30 billion in financing to Chinese solar power manufacturers.[14]:1
At the end of 2010,CDB held US$687.8 billion in loans,more than twice the amount of the World Bank.[3]
After Chen left the governorship of CDB in 2013,the bank's institutional power decreased.[7]:157
The next CDB governor,Hu Huaibang,removed CDB personnel to staff the bank with personnel loyal to himself.[7]:158 Hu then leveraged his personal influence to approve large amounts of industrial loans which ultimately failed.[7]:158 Hu was removed from office in 2018 on suspicion of corruption and he was sentenced to life in prison in 2021 for accepting bribes to approve projects that should not have passed CDB criteria.[7]:158–159 Following these events,CDB became significantly more cautious in its financing decisions.[7]:159
In 2015,China used its foreign exchange reserves to recapitalize CDB,which in turn empowered it to make significant foreign loans.[8]:70
In 2017,CDB provided RMB 130 billion to fund infrastructure and environmental upgrading in Xiong'an.[17]:155
As of December 2018,outstanding loans to 11 provincial-level regions along the belt amounted to 3.85 trillion yuan (about 575 billion U.S. dollars),according to the CDB. New yuan loans to these regions reached 304.5 billion yuan last year,accounting for 48 percent of the bank's total new yuan loans. The funds mainly went to major projects in the fields of ecological protection and restoration,infrastructure connectivity,and industrial transformation and upgrading. The CDB will continue to support ecological protection and green development of the Yangtze River in 2019,said CDB Chairman Zhao Huan. China issued a development plan for the Yangtze River Economic Belt in September 2016 and a guideline for green development of the belt in 2017. The Yangtze River Economic Belt consists of nine provinces and two municipalities that cover roughly one-fifth of China's land. It has a population of 600 million and generates more than 40 percent of the country's GDP.[18]
As of at least 2018,CDB was the world's largest development bank,with total assets exceeding 16 trillion RMB.[19]:101
In 2020,China joined the G20-led Debt Service Suspension Initiative,through which official bilateral creditors suspended debt repayments of 73 of the poorest debtor countries.[7]:134 China did not include CDB loans as part of the initiative under the logic that CDB was a commercial lender rather than an official bilateral creditor.[7]:135
Along with the Silk Road Fund and the Export-Import Bank of China,the China Development Bank is one of the primary financing sources for Belt and Road Initiative projects in Africa,[20]:245 and is an important funder of BRI projects more generally.[21]
Organizational structure
The Governors of the bank report to a Board of Supervisors,who are accountable to the central government. There are four vice governors and two assistant governors.[22] At the end of 2004,CDB had about 3,500 employees.[citation needed] About 1,000 of CDB's employees work at the Beijing Headquarters,with the rest in 35 mainland branches;including a representative office in Tibet and a branch in Hong Kong.[citation needed]
As of 2021,the CDB has more than 9,000 employees.[1]
CDB does not accept deposits from individuals.[7]:39 Its depositors are other financial agencies that are collaborating with CDB or entities which are repaying loans borrowed from CDB.[7]:39
Stuart Gulliver,executive director of HSBC signs a "Memorandum of Understanding" with Zheng Zhijie,Vice Governor of China Development Bank,10 January 2011.
The International Bank for Reconstruction and Development (IBRD) is an international financial institution,established in 1944 and headquartered in Washington,D.C.,United States;it is the lending arm of World Bank Group. The IBRD offers loans to middle-income developing countries. It is the first of five member institutions that compose the World Bank Group. The initial mission of the IBRD in 1944,was to finance the reconstruction of European nations devastated by World War II. The IBRD and its concessional lending arm,the International Development Association (IDA),are collectively known as the World Bank as they share the same leadership and staff.
The Ministry of Finance of the People's Republic of China is the constituent department of the State Council of the People's Republic of China which administers macroeconomic policies and the annual budget. It also handles fiscal policy,economic regulations and government expenditure for the state. The ministry also records and publishes annual macroeconomic data on China's economy. This includes information such as previous economic growth rates in China,central government debt and borrowing and many other indicators regarding the economy of mainland China.
The State Administration of Foreign Exchange (SAFE) of the People's Republic of China is an administrative agency under the State Council tasked with drafting rules and regulations governing foreign exchange market activities,and managing the state foreign-exchange reserves,which at the end of December 2016 stood at $3.01 trillion for the People's Bank of China. The current director is Zhu Hexin.
China's banking sector had CN¥417 trillion in assets at the end of 2023. The "Big Four" state-owned commercial banks are the Bank of China,the China Construction Bank,the Industrial and Commercial Bank of China,and the Agricultural Bank of China,all of which are among the largest banks in the world as of 2018. Other notable big and also the largest banks in the world are China Merchants Bank and Ping An Bank.
The Export–Import Bank of China is a policy bank of China under the State Council. Established in 1994,the bank was chartered to implement the state policies in industry,foreign trade,economy,and foreign aid to other developing countries,and provide policy financial support so as to promote the export of Chinese products and services.
The 2008–09 Chinese economic stimulus plan was a RMB¥4 trillion stimulus package aiming to minimize the impact of the Great Recession on the economy of China. It was announced by the State Council of the People's Republic of China on 9 November 2008. The economic stimulus plan was seen as a success:While China's economic growth fell to almost 6% by the end of 2008,it had recovered to over 10% by in mid-2009. Critics of China's stimulus package have blamed it for causing a surge in Chinese debt since 2009,particularly among local governments and state-owned enterprises. The World Bank subsequently went on to recommend similar public works spending campaigns to western governments experiencing the effects of the Great Recession,but the US and EU instead decided to pursue long-term policies of quantitative easing.
A Green bond is a fixed-income financial instruments (bond) which is used to fund projects that have positive environmental and/or climate benefits. They follow the Green Bond Principles stated by the International Capital Market Association (ICMA),and the proceeds from the issuance of which are to be used for the pre-specified types of projects.
The Australian government debt is the amount owed by the Australian federal government. The Australian Office of Financial Management,which is part of the Treasury Portfolio,is the agency which manages the government debt and does all the borrowing on behalf of the Australian government. Australian government borrowings are subject to limits and regulation by the Loan Council,unless the borrowing is for defence purposes or is a 'temporary' borrowing. Government debt and borrowings have national macroeconomic implications,and are also used as one of the tools available to the national government in the macroeconomic management of the national economy,enabling the government to create or dampen liquidity in financial markets,with flow on effects on the wider economy.
Climate finance is an umbrella term for financial resources such as loans,grants,or domestic budget allocations for climate change mitigation,adaptation or resiliency. Finance can come from private and public sources. It can be channeled by various intermediaries such as multilateral development banks or other development agencies. Those agencies are particularly important for the transfer of public resources from developed to developing countries in light of UN Climate Convention obligations that developed countries have.
The New Development Bank (NDB),formerly referred to as the BRICS Development Bank,is a multilateral development bank established by the BRICS states. According to the Agreement on the NDB,"the Bank shall support public or private projects through loans,guarantees,equity participation and other financial instruments." Moreover,the NDB "shall cooperate with international organizations and other financial entities,and provide technical assistance for projects to be supported by the Bank."
The Belt and Road Initiative,known in China as the One Belt One Road and sometimes referred to as the New Silk Road,is a global infrastructure development strategy adopted by the Chinese government in 2013 to invest in more than 150 countries and international organizations. The BRI is composed of six urban development land corridors linked by road,rail,energy,and digital infrastructure and the Maritime Silk Road linked by the development of ports.
The Silk Road Fund is a China Government Guidance Fund to foster increased investment in countries along the Belt and Road Initiative,an economic development initiative primarily covering Eurasia. The Chinese government pledged US$40 billion for the creation of the investment fund,established on 29 December 2014.
The national debtof the People's Republic of China is the total amount of money owed by the central government,local governments,government branches and state organizations of China. According to the International Monetary Fund,general government debt amounted to 77% of GDP in 2022. Large-scale infrastructure construction in China has been debt-financed through the use of local government financing vehicles (LGFVs) that borrow from banks and issue corporate bonds known as "urban construction and investment bonds" or "chengtou bonds".
China originally joined the World Bank Group (WBG) on December 27,1945. However,after the Chinese Civil War,the World Bank recognized the Republic of China as its member,until the relationship ended in 1980,when the membership was replaced by the People's Republic of China. The People's Republic of China (PRC) did not become involved with the World Bank group until 1980,when it first joined the World Bank in April due to the market reforms known as reform and opening-up. Prior to the economic reform and its relation with the World Bank,according to CRS,"China maintained policies that kept the economy very poor,stagnant,centrally controlled,vastly inefficient,and relatively isolated from the global economy". Since its entry into the World Bank,China has transformed into a market-based economy and has experienced rapid economic and social development. Currently,although China has become the world's second largest economy with 1.4 billion population,it still has a close relationship with the World Bank in areas such as poverty,environmental protection and new challenges from the reform.
Debt-trap diplomacy is a term to describe an international financial relationship where a creditor country or institution extends debt to a borrowing nation partially,or solely,to increase the lender's political leverage. The creditor country is said to extend excessive credit to a debtor country with the intention of extracting economic or political concessions when the debtor country becomes unable to meet its repayment obligations. The conditions of the loans are often not publicized. The borrowed money commonly pays for contractors and materials sourced from the creditor country.
Policy bank (政策性银行),or policy lender,refers to non-profit professional financial institutions established by the Chinese government with the goal of implementing the government's economic policies and carrying out financial business in specific fields. This measure separates policy finance from commercial finance and establishes a policy bank to undertake strictly defined policy businesses. Policy banks' sources of funds mainly rely on issuing financial bonds or borrowing from the central bank,and generally do not accept deposits from the public.
A local government financing vehicle (LGFV) (Chinese:地方政府融资平台),also known as a local financing platform (LFP),is a funding mechanism by a local government in China. It usually exists in the form of an investment company that borrows money to finance real estate development and other local infrastructure projects. LGFVs can borrow money from banks,or they can borrow on the open market by selling bonds known as "municipal investment bonds" or "municipal corporate bonds" (城市投资债券or 城投债),which are repackaged as "wealth management products" and sold to individuals.
Green finance is officially promoted as an important feature of the Belt and Road Initiative,China's signature global economic development initiative. The official vision for the BRI calls for an environmentally friendly "Green Belt and Road".
The Shanghai Cooperation Organisation Interbank Consortium is a platform for joint financing of development projects by members and other participants of the Shanghai Cooperation Organisation.
The corporate debt bubble is the large increase in corporate bonds,excluding that of financial institutions,following the financial crisis of 2007–08. Global corporate debt rose from 84% of gross world product in 2009 to 92% in 2019,or about $72 trillion. In the world's eight largest economies—the United States,China,Japan,the United Kingdom,France,Spain,Italy,and Germany—total corporate debt was about $51 trillion in 2019,compared to $34 trillion in 2009. Excluding debt held by financial institutions—which trade debt as mortgages,student loans,and other instruments—the debt owed by non-financial companies in early March 2020 was $13 trillion worldwide,of which about $9.6 trillion was in the U.S.
1 2 3 Michael Forsythe, Henry Sanderson (June 2011). "Financing China Costs Poised to Rise With CDB Losing Sovereign-Debt Status". Bloomberg Market Magazine.
↑ Lewis, Joanna I. (2023). Cooperating for the Climate: Learning from International Partnerships in China's Clean Energy Sector. Cambridge, Massachusetts: The MIT Press. ISBN978-0-262-54482-5.
↑ Murphy, Dawn (2022). China's Rise in the Global South: the Middle East, Africa, and Beijing's Alternative World Order. Stanford, California: Stanford University Press. ISBN978-1-5036-3009-3.
This page is based on this Wikipedia article Text is available under the CC BY-SA 4.0 license; additional terms may apply. Images, videos and audio are available under their respective licenses.
