China to reform policy banks

The Chinese government is restructuring the country's three major policy banks in a bid to better finance projects during the current economic slowdown, the country's cabinet said. The State Council said on Sunday it had approved the central bank's reform plans for China Development Bank (CDB), Export-Import Bank of China (EXIM) and Agricultural Development Bank of China (ADBC), according to three statements released on the government's website.
Chinese outbound investment and exports reached record levels last year, but trade growth has wobbled this year and concerns over domestic debt levels have increased.
By clarifying and redirecting the policy banks' roles, Beijing hopes to deepen support for Chinese companies investing abroad, provide better trade financing services, and also address mission creep by the banks, in particular EXIM and CDB, which have begun overlapping with each other and with commercial lenders.
The cabinet said that CDB, China's policy lender responsible for large infrastructure investment at home and overseas, should "play an active role in stablizing China's economic growth and structural adjustment" and "increase support to strategic areas and sectors in difficulties"
It also said CDB must "persist in its role as a developmental financial institution", implying a step away from earlier efforts to make CDB a more commercial, less government-backed lender.
EXIM bank was told by the State Council to focus on its policy-bank role of financing China's ambitious global expansion, "supporting exports and implementing the government's 'going out' strategy".
In Feburary, EXIM appointed central bank deputy governor Hu Xiaolian as its new chairwoman and Communist Party chief, paving the way for the reforms. In an online statement released on Monday, Exim said Hu would lead a new reform working office.
The statement quoted Hu as saying that the bank should take advantage of "significant development opportunities" arising from strategies such as 'One Belt, One Road'", referring to a grand plan for a network of railways, highways and other infrastructure to create a new Silk Road.
The cabinet also instructed ADBC, the country's major lender for agri-business, to separate policy-oriented lending from other businesses and build up control and decision systems to become a "sustainable" policy lender.
The statements provided no details and didn't give any timelines for the changes.
"In an era of talking about reform being market-oriented, this seems to be a step in the opposite direction, to make them more policy oriented than commercially driven," said Oliver Barron, analyst at NSBO in Beijing.