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Some Aspects of Chinese Policy Banks’ Activity at the Present Time
 
PIIS013128120018450-6-1
DOI10.31857/S013128120018450-6
Publication type Article
Status Published
Authors
Ekaterina Serbina 
Occupation: Post-graduate student, Center for Chinese Economy and Social Studies
Affiliation: Institute of Far Eastern Studies, Russian Academy of Science
Address: Russian Federation, Moscow
Journal nameProblemy Dalnego Vostoka
EditionIssue 1
Pages111-126
Abstract

The Chinese policy banks (the State Development Bank of China, the Export-Import Bank of China and the Agricultural Development Bank of China) were created with the goal of financing national projects both abroad and inside China. They play an important role in providing loans to green and social projects and concessional lending to small and medium-sized enterprises. It is expected that there will be growth in the financing of scientific and technical areas during the 14th Five-Year Plan (2021-2025).

In order to finance large-scale projects, the policy banks require a constant flow of funds. This article analyzes the main sources of the banks’ funding amongst which accepting loans from the People`s Bank of China and the issuing of bonds are in the lead. The two sources mentioned are characterized by reliability and constancy, but also have risks attached to them. These include limited sources of liquidity in general, increasing competition from local administrations which are also empowered to issue bonds, lending to low profit (but strategically important) projects, an implied long maturity period of medium and long-term loans, and other factors. Proof of sufficient capital is vital because policy banks have a key role regarding instruments for countercyclical regulation in the process of stabilizing the economy for example when funds were distributed through the banks to the most vulnerable sectors during the worst of the pandemic.

To improve the policy banks’ financial efficiency it has been necessary to draft a Policy Banks Act. This supports the development not only of national but also of commercial projects, the granting of more independence to branches in the search for and selection of projects (taking into consideration local/regional/international specifics), the diversification of liquidity sources and the establishment of compensation for losses sustained during repayment of failing loans, to improve risk management. This necessary next stage of banking reform is expected to be enacted during 2022-2023.

KeywordsChina Development Bank, Eximbank of China, Agricultural Development Bank of China, policy banks, financial institutions, countercyclical regulation
Received02.02.2022
Publication date16.02.2022
Number of characters34742
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