Beijing clears way for CDB to go commercial
Saturday, 15 March 2008
Jamil Anderlini
China's cabinet has backed a plan to transform China Development Bank, the formerly staid infrastructure lender, into a listed company that would eventually take deposits and make lending decisions based on commercial, rather than political, considerations.
A State Council department, set up to oversee CDB's reform, gave a green light to the plan recently, according to a person at CDB who asked not to be named.
CDB will restructure into a shareholding company, assume responsibility for the risks of its investments, make lending decisions based on its own commercial interests, take deposits from the public and eventually sell shares in an initial public offering. It will concentrate on wholesale banking, however, rather than setting up retail operations.
The bank is in essence a policy arm of government, tasked with lending to politically mandated projects, such as the Three Gorges dam and Chinese companies trying to do business in Africa. It does not take deposits, but raises money by issuing bonds.
CDB has been investing aggressively abroad. It took a $3.0bn stake in Barclays last year and provided most of the funding for last month's $14.1bn investment in Rio Tinto by Chinalco and Alcoa.
But it has only recently embarked on reforms that most of the country's largest state-owned commercial lenders have completed.
In January, China's banking regulator rejected a CDB proposal to invest billions of dollars in the large US banking concern Citigroup for reasons that remain unclear.
The bank received a $20bn injection from China Investment Corp, the country's newly established sovereign wealth fund, at the end of last year in preparation for its restructuring.
The size of CIC's stake in CDB has not been decided, but, according to people who are familiar with the matter, the fund will share ownership with the ministry of finance, which currently owns CDB on behalf of the government.
Those people said that CDB might introduce other -strategic investors before it sold shares in an IPO that was most likely to take place in Shanghai.
If that happens, CDB would be following in the footsteps of China's largest state-owned banks, including Industrial and Commercial Bank of China, Bank of China and China Construction Bank. Those state-owned banks all received government bail-outs before selling stakes to foreign investors and listing in Hong Kong and Shanghai.
........................................
FT Syndication Service
China's cabinet has backed a plan to transform China Development Bank, the formerly staid infrastructure lender, into a listed company that would eventually take deposits and make lending decisions based on commercial, rather than political, considerations.
A State Council department, set up to oversee CDB's reform, gave a green light to the plan recently, according to a person at CDB who asked not to be named.
CDB will restructure into a shareholding company, assume responsibility for the risks of its investments, make lending decisions based on its own commercial interests, take deposits from the public and eventually sell shares in an initial public offering. It will concentrate on wholesale banking, however, rather than setting up retail operations.
The bank is in essence a policy arm of government, tasked with lending to politically mandated projects, such as the Three Gorges dam and Chinese companies trying to do business in Africa. It does not take deposits, but raises money by issuing bonds.
CDB has been investing aggressively abroad. It took a $3.0bn stake in Barclays last year and provided most of the funding for last month's $14.1bn investment in Rio Tinto by Chinalco and Alcoa.
But it has only recently embarked on reforms that most of the country's largest state-owned commercial lenders have completed.
In January, China's banking regulator rejected a CDB proposal to invest billions of dollars in the large US banking concern Citigroup for reasons that remain unclear.
The bank received a $20bn injection from China Investment Corp, the country's newly established sovereign wealth fund, at the end of last year in preparation for its restructuring.
The size of CIC's stake in CDB has not been decided, but, according to people who are familiar with the matter, the fund will share ownership with the ministry of finance, which currently owns CDB on behalf of the government.
Those people said that CDB might introduce other -strategic investors before it sold shares in an IPO that was most likely to take place in Shanghai.
If that happens, CDB would be following in the footsteps of China's largest state-owned banks, including Industrial and Commercial Bank of China, Bank of China and China Construction Bank. Those state-owned banks all received government bail-outs before selling stakes to foreign investors and listing in Hong Kong and Shanghai.
........................................
FT Syndication Service