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Policy bank denies tightening credit

Date:2014-02-12 Views:0 Author:Chen Yang Source:Global Times

The China Development Bank (CDB), one of the country's three policy banks, has denied a report it tightened credit to overseas clients as a result of the country's efforts to regulate shadow banking.

"CDB's credit business operates normally, and we did not have the ­issues that were reported in the Financial Times," the bank said in a reply sent to the Global Times via e-mail late Monday.

CDB has begun asking some international clients - including an Indian infrastructure developer and an Indian shipping group - to delay drawing down lines of credit that had previously been offered, Financial Times reported Sunday, citing individuals with direct knowledge of the matter.

The report did not specify the names of the two Indian firms.

The bank has played an important role in international development ­finance.

The Chinese policy bank issued more than $100 billion of foreign ­exchange loans for its international clients last year, with the loan balance for international business at $292.2 billion by the end of 2013, according to data ­released by the bank in late January.

The CDB has not released its annual report for 2013 yet, so the amount of outstanding foreign exchange loans by the end of 2013 is not available.

Unlike commercial banks that ­accept deposits from the public, CDB's funding mainly comes from selling bonds to other financial institutions, and it is the second largest bond issuer in China behind the Ministry of Finance.

The financial bonds issued by CDB that ends by 2015 have a zero risk weight till they mature, the China Banking Regulatory Commission said in November 2013.

In the bank's latest bond issue on Tuesday, the bank saw the rate on its 10-year bond rise to 5.71 percent from 4.43 percent in January 2013.

The rate it pays on five-year bonds also rose to 5.56 percent Tuesday from 4.16 percent in January last year, data from financial information portal aastocks.com showed.

"The yields on the medium- to long-term bond are all slightly higher than market forecast, because liquidity in the interbank market is still tightening," Yang Xuan, a bond analyst with Industrial Futures, said on Tuesday.

But the bank said in the statement that recent rising money market rates will not heavily influence its average borrowing cost, citing the bonds it issued as mainly medium- to long-term debts.

"If you look at long-term and assume that interbank rates will rise after China's liberalization of interest rates, the CDB's explanation is reasonable," Yang said. "But the rising bond yields in the past year did increase the bank's borrowing costs."

She noted banks in China face rising borrowing costs and a policy bank like CDB could not be exempted, citing reasons including banks' excessive lending, the central bank's tightening monetary stance and competition from fast-growing Internet finance.

Shanghai-based Dongfang Daily reported Tuesday that CDB has raised loan rates for some of its clients in the infrastructure and education sectors since the end of last year, citing an unnamed source familiar with the matter.

As CDB plans to direct more than 60 percent of its annual loans to boost urbanization starting 2014, there are concerns that the bank's move to raise lending rates will affect the country's urbanization process.

The bank will set the lending rates taking into consideration the national economy's medium- to long-term development strategy, the statement said.

Song Shengxia contributed to the story