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Top Biz News

CDB treading cautiously on business expansion

By Wang Bo (China Daily)
Updated: 2009-12-02 08:04

China Development Bank (CDB) would continue to fund medium and long-term investments for the nation's strategic development agenda without diluting the gains it made over the years from financial reform, said a senior bank official.

"The bank's financial health is our lifeline and we will not imperil it for the sake of rapid business expansion," Liu Yong, director of CDB's business development department, told China Daily in an interview.

The State-run lender for public works projects, together with a slew of Chinese commercial banks, advanced record loans this year to shore up the slowing economy, causing widespread concerns of a bad loan pileup and reversal of the gains from years of financial reform.

"Even though we are the policy lender giving loans under the country's development guidelines, it does not mean we should operate against commercial principles," Liu said.

As a lending arm of the State, the bank has been instrumental in supporting the nation's western development program initiated ten years ago. The lender has boosted the social and economic progress of less developed regions by funding a big chunk of the road, railway, airports and electrical network construction projects.

Differentiating from the traditional view that lending to underdeveloped regions is unprofitable, CDB considers financing public works projects in the west as a key competitive edge, Liu said.

"The bank gained an upper hand in price negotiations in the western region, where competition between banks is less fierce than in eastern China," he said.

As of October this year, the bank, which had a presence in all the twelve provinces and regions in the west, extended 1.26 trillion yuan of loans to western China over the past ten years. Its overall bad loan ratio stood at 0.83 percent by the end of June 2009, against the industry average of 1.77 percent.

Responding to concerns that loans for infrastructure projects may be risky, Chang Siyong, deputy director of the bank's business planning department, said CDB had a clear vision about the country's regional and industrial development trend.

"Given the accelerating pace of the nation's urbanization drive, loans that went to infrastructure projects are less likely to turn sour over the next ten years," Chang said.

CDB, established in 1994 on the basis of the integration of the nation's six investment companies, has been reforming along the commercial line over the past few years and was eventually re-launched as a commercial entity in December 2008.