China world lending leader

18 January 2011 04:01 pm Views - 9623

China has lent more money to other developing countries over the past two years than the World Bank, a stark indication of the scale of Beijing's economic reach and its drive to secure natural resources.

China Development Bank and China Export-Import Bank signed loans of at least $110bn (£70bn) to other developing country governments and companies in 2009 and 2010, according to Financial Times research. The equivalent arms of the World Bank made loan commitments of $100.3bn from mid-2008 to mid-2010, itself a record amount of lending in response to the financial crisis.

The volume of overseas loans by the two banks indicates how Beijing is forging new patterns of China-led globalisation, as part of a broader push to scale back its economic dependency on western export markets.

The financial crisis allowed Beijing to push the commercial interests of its energy companies by offering loans to producer countries at a time when financing was hard to come by.
The agreements include large loan-for-oil deals with Russia, Venezuela and Brazil, as well as loans for an Indian company to buy power equipment and for infrastructure projects in Ghana and railways in Argentina.
The World Bank has been trying to find ways to co-operate with Beijing to avoid escalating competition over loan deals. China itself has been one of the biggest recipients of World Bank loans in the past."One of the topics I have been discussing with the Chinese authorities is how we can work with them to share our mutual experience to support other developing countries, whether in south-east Asia or Africa," Robert Zoellick, World Bank president, said on a visit to China last year.

CDB and EximBank provide more preferential terms than the World Bank and other lenders for certain deals that are strongly supported by Beijing, but offer terms that are closer to international standards for less politically sensitive deals. They also tend to impose less onerous transparency conditions.

The flurry of Chinese lending to oil producers has already caused some anxiety in the US about energy security. According to Erica Downs, a China expert at the Brookings Institution, the impact on US interests is mixed. "CDB's [energy] loans indicate that Chinese lenders are likely to be more concerned about good economic policymaking in recipient countries and they are not reducing the amount of oil available to the US," she said. "On the other hand, CDB's loans are empowering anti-American regimes in Latin America."

CDB and China EximBank do not publish figures for overseas loans. They declined to comment. The World Bank said it was working closely with China and welcomed "an important and growing partnership".

The statistics were collected by examining public announcements by the banks, the borrowers or the Chinese government.
An adviser to CDB said the volume of lending suggested by public statements understated the real level of the bank's new loan commitments to developing countries.

The World Bank figures are for the International Bank of Reconstruction and Development, the bank's main lending arm, and the International Finance Corporation, which lends to the private sector. They do not include the International Development Association, which makes grants and low-interest loans. China also gives financial aid to other developing countries, but provides little detail.

Beijing has also used offshore lending by CDB and EximBank, which have a mandate to further the interests of the Communist Party and the Chinese state, to accelerate its goal of making its currency more international. For example, half of the $20bn loan it extended to Venezuela was denominated in renminbi and intended for purchases of Chinese goods and equipment. In other cases, the foreign currency in the loans has come directly from China's foreign exchange reserves. (CNN)