The China Development Bank (CDB) is a state-owned and state-funded development finance institution recognized as being one of the largest in the world, as well as being the biggest Chinese bank in terms of long-term lending, bond issuance, and partnerships in international investment and financing.
With a major emphasis on financing pioneer and innovative projects, the CDB primarily adheres to Chinese national development plans which have a significant impact on its portfolio and financing mechanisms. As of 2022, this DFI registered an impressive US$11 billion profit, with a net interest income of nearly US$25 billion.
In this article in DevelopmentAid’s DFI Files series, we delve into the China Development Bank’s history and funding mechanisms, analyzing its goals and some of its projects.
The China Development Bank was founded in 1994 as a policy financial institution. Subsequently, in December 2008, the organization became a corporation and adopted the name, the China Development Bank Corporation. The State Council officially designated the organization as a “development finance institution” in March 2015. This recognition confirmed the CDB’s position as an institution primarily dedicated to providing financial assistance to multiple developmental projects and programs.With over 10,000 employees, the CDB now has 37 primary and four secondary branches on the Chinese mainland, one offshore office in Hong Kong, and 11 overseas representative offices in international cities such as Cairo, Moscow, Rio de Janeiro, Caracas, London, Vientiane, Astana, Minsk, Jakarta, Sydney, and Budapest.
The organization’s list of subsidiaries includes CDB Capital, CDB Securities, CDB Leasing, the China-Africa Development Fund, the CDB Development Fund, and the CDB Infrastructure Fund.
The China Development Bank boasts over US$58 billion (RMB 421.248 billion) of registered capital. The organization’s shareholders and their shareholdings (as of 2022) are as follows:
Source: CDB
In 2022, the CDB managed to achieve a net profit of US$11 billion (RMB 84.340 billion). The bank’s major source of income was net interest income which reached US$25 billion (RMB 170.310 billion).
The data in the table is presented in millions USD
Source: CDB
In 2022, the main source of funding by the CDB was debt insurance. The organization’s debt securities balance was US$1.67 billion (RMB 12,125.956 billion), an increase of 5.62% from the previous year, making up 72.88% of all liabilities.
According to the CDB’s annual report, the DFI “put to good use” its medium- and long-term loans and provided the CDB Infrastructure Investment Fund with full credit in areas of focus that included:
- Networked infrastructure
- Infrastructure for industrial upgrade
- Urban and rural infrastructure
- Agricultural infrastructure
- Infrastructure that relates to national security
The organization contributed to the development of a modern infrastructure framework by issuing RMB1.4 trillion in infrastructure loans and investing US$59 billion (RMB 425.6 billion) from the CDB Infrastructure Investment Fund over the course of 2022.
It has been estimated that China provided roughly US$153 billion in loans to African nations alone between 2000 and 2019 with a large portion of this being in the form of loans for the construction of infrastructure.
Based on a Bloomberg review of official statements and state-run media reports, over two-thirds of China’s regions have disclosed planned expenditure on transport infrastructure, energy production, and industrial parks in 2023, totaling over 12.2 trillion yuan (US$1.8 trillion).
CDB’s role in the energy sector and agriculture
Inside China, with an emphasis on novel energy projects including the production of electricity from wind and photovoltaic (PV) power as well as large hydro- and nuclear power and pumped storage initiatives, the DFI supported supply-side power reforms to improve the energy mix.
To protect national energy security, the CDB aims to strengthen gas output, supply, storage, and delivery networks as well as address the deficiencies in infrastructure in the oil and gas industry.
In agriculture, the balance of loans relating to rural areas increased by US$36.4 billion (RMB262.1 billion) in 2022 as the CBD continued to boost financial assistance for agriculture, rural communities, and farmers. Assistance for high-priority areas such as the seed sector, facility agriculture, and agricultural parks was consistently increased. The organization encouraged the improvement of rural living conditions and rural infrastructure in China.
In the international arena, the CDB provides loans to numerous nations, mostly funding infrastructure and natural resource programs. For instance, the China-Africa Development Fund, a China Government Guidance Fund entirely financed by the CBD, seeks to advance the economic growth and industrialization of Africa, combat poverty, improve the standard of living for Africans, and strengthen Africa’s ability to sustain development.
In addition, the CDB ranks as one of the most popular fund-providing institutions in Latin America and the Caribbean (LAC) for extractive and extensive construction endeavors, a great many of which are situated on or near areas of ecological vulnerability and indigenous lands. A major part of the loans made to Venezuela, Ecuador, and Brazil, which together account for 85% of CDB loans to the LAC region, are repaid with oil revenue.
CDB’s impact on key industries
To encourage the improvement of water resources, the CDB also focuses on important industries and underdeveloped fields in China, focusing on large-scale national water conservation projects and programs that are essential to the livelihoods of people, including flood prevention and relief, rural water delivery, and water ecological restoration. In 2022, it provided loans of US$25.8 billion (RMB186.4 billion) for endeavors associated with water resources.
The Yangtze-to-Huaihe water diversion is a major project that aims to improve the distribution of water resources in the Huaihe River Basin. In addition, the initiative aims to improve the main waterway that connects the north with the south. The company’s annual report for 2022 states that 51.17 million people benefit from the annual 4.3 billion cubic meters of water diversion.
China’s Belt and Road Initiative (BRI)
The Belt and Road Initiative (BRI) is supported to a large extent by the CDB. Between 2013 and 2019, over 600 Belt and Road infrastructure initiatives received financing from the CDB totaling over US$190 billion. BRI is said to be one of the biggest infrastructure projects ever developed with the intended goal being to create a physical infrastructure that would link East Asia and Europe. The plans have grown over the last 10 years to include Africa, Oceania, and Latin America with investments to be made in over 150 countries.
The World Bank has projected that if the BRI is successful, it could increase trade flows in the 71 participating nations by 4.1%, reduce the cost of international trade by 1.1-2.2%, and increase GDP growth in developing East Asian and Pacific nations by a median of 2.6-3.9%. Moreover, the Center for Economics and Business Research estimates that the BRI will potentially boost global GDP by US$7.1 trillion annually by 2040.
China Development Bank and the Sustainable Development Goals
In March 2022, the CDB, the National Development and Reform Commission of China, and the United Nations Development Programme (UNDP) strengthened their partnership to collaborate on sustainable financing and investment in the promotion of the Sustainable Development Goals (SDGs) and the worldwide effort to handle the effects of climate change.
In collaboration with the CDB’s Innovation and Development Center, UNDP will contribute information to the CDB’s financing, programming, and risk management policies in order to assist with sustainable development and the effective realization of climate goals in China’s international activities.
To increase sustainable development and achieve a beneficial effect on the climate, UNDP and the Center intend to support digital financial solutions and build mutual educational and experience partnerships between China and other participating countries.
CBD and environmental conservation
In 2022, the CDB amended some of its internal lending rules and protocols to improve its green finance governance system, incorporate green finance values into lending rules, regulations, and procedures, and increase its support to important green and low-carbon sectors such as clean energy, pollution mitigation, curbing carbon emissions, and environmental preservation and rehabilitation.
Compressed Air Energy Storage energy system
One of the DFI’s energy projects worth mentioning is the salt cavern Compressed Air Energy Storage (CAES) together with the power generation system deployed in Jintan, Jiangsu Province. This project unites businesses, universities, research organizations, and consumers and is considered to be the world’s first non-supplementary fired CAES power station.
This system does not require external heating to run which means that it uses only the compressed air’s internal energy to produce electricity which can increase the efficiency and environmental friendliness of the CAES process.
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