Policy bank

Policy banks of China (Chinese: 政策性银行; pinyin: Zhèngcèxìng Yínháng), policy lenders[1] or institutional banks refer to two Chinese banks set up by State Council of China in 1994, namely The Export–Import Bank of China (Exim) and the Agricultural Development Bank of China (ADBC). The two banks aim at implementing economic policies of the government and conducting non-profit businesses in particular sectors.[2] China Development Bank (CDB) used to be one of such banks before its shift to a corporation in 2008.

Each of the two is dedicated to a specific lending purpose. ADBC provides funds for agricultural development projects in rural areas and Exim Bank of China specializes in trade financing, investment and international economic cooperation.[3] The former member CDB specializes in financing of infrastructure, energy and transportation.

Other non-bank financial institutions are referred to as policy entities. Sinosure is described as "China's only policy-oriented insurance company" and offers insurance products for Chinese exporters.[4] Sino Guarantee plays a quasi-policy role in Chinese capital markets.[5]

Development

In 1993, Zhu Rongji gave a speech in his capacity as governor of the People's Bank of China which helped serve as the basis for the subsequent development of China's policy banks.[6]: 47  Zhu explained his view of how China's financial system should be structured, stating that the state "must establish a system of financial institutions, under the supervision of the central bank, principally consisting of national policy banks and state-owned commercial banks, but that encompasses a variety of financial institutions[.]"[6]: 47  His proposed institutions included an export-import bank, a national interbank lending system, a short-term paper market, and an renminbi exchange rate mechanism based on the market rate.[6]: 47  As researcher Zongyuan Zoe Liu writes, "The Party's contemporary economic power and financial influence are based substantially upon the institutions that Zhu envisioned in 1993, Fifteen years later, in 2008, China's policy banks and sovereign funds emerged on the global financial scene as some of the world's largest institutional investors, wielding significant influence over financial markets and projecting the Party's power abroad."[6]: 47 

In 2015, China used its foreign exchange reserves to recapitalize China Development Bank and the Export-Import Bank of China.[6]: 70  This in turn empowered those policy banks to make significant loans in Eurasia, Latin America, Africa, and the Middle East.[6]: 70 

See also

References
  1. "China's policy bank lends 859b yuan for rural infrastructure in 2017". gov.cn.
  2. "Policy Banks Industry in China". IBIS World.
  3. "Introduction". The Export-Import Bank of China. Archived from the original on 2019-05-12. Retrieved 2018-12-05.
  4. Cai, Xiao (August 18, 2017). "Sinosure to help exporters in wake of policy change". China Daily.
  5. "Moody's assigns Baa3 IFS rating to China United SME Guarantee Corporation". Moody's Investors Service. Moody's.
  6. Liu, Zongyuan Zoe (2023). Sovereign Funds: How the Communist Party of China Finances its Global Ambitions. The Belknap Press of Harvard University Press. doi:10.2307/jj.2915805. ISBN 9780674271913. JSTOR jj.2915805.
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