chinese banks: environmental impacts and opportunities michelle chan-fishel friends of the earth –...
TRANSCRIPT
Chinese banks:Environmental Impacts and
Opportunities
Michelle Chan-Fishel
Friends of the Earth – US
BankTrack
Outline
• Environmental implications of Chinese banks’ overseas financing
• Overview of Chinese banking sector
• Profiles of a few Chinese banks
Environmental Implications of Chinese Banks’ Overseas
Financing
Three Examples
Oil Palm Plantations in Borneo
• World’s largest proposed palm oil plantation development scheme– 18 separate oil palm plantations with an average size
of 100,000 hectares each– Most of these 18 proposed plantations will be located
in the Heart of Borneo area– Headwaters of many important rivers, including
Rajang, Baram Kinabatangan, Belait, Kapuas, Mahakam and Barito
– Biodiversity: 200 bird species, 150 reptile and amphibian species, 100 mammal species including orang-utans, elephants and rhinos, clouded leopard, sun bear, Bornean gibbons (endemic)
Oil Palm Plantations in Borneo
• China Development Bank
• CITIC Group
• China National Constructional & Agricultural Machinery Import & Export Corporation
• Guangdong Foreign Trade Group
China International Marine Container
• Logging in Suriname (South America)– Extracting hardwood resources for shipping
containers and pallets– Adversely affecting a maroon community
(colonies originally settled by escaped African slaves) that has already been resettled from a dam
– Also logging operations in Cambodia
China International Marine Container
• Export-Import Bank of China• Bank of Communications• China Merchants Bank• China Construction Bank• Bank of China• Nanyang Commerical Bank• Others: Citibank, HSBC, Standard
Chartered
China National Machinery and Equipment Export-Import Corp.
• A builder of the Three Gorges dam• Contracted by United Fiber Systems to build
Kiani Kertas pulp mill in East Kalimantan, 80% financed by CNME– 525,000 tons/year– Will rely on Sumalindo plantations, located on
indigenous territory– International NGO campaigns forced Deutsche Bank
to drop UFS as a client, UFS to withdraw an application for World Bank (MIGA) financing, and a Dutch company to pull out of the mill
China National Machinery and Equipment Export-Import Corp.
• Belinga iron ore mine (Gabon), port, rail system, and two dams; US$3 billion– Identified as a “Priority Important Area” in the
Regional Action Plan for the Conservation of Chimpanzees and Gorillas in Western Equatorial Africa
• Banks– Export-Import Bank of China 3 year RMB 8.28
trillion line of credit (2003)– Bank of China RMB 8 billion credit (2002)
Environmental Opportunities
• High environmental financing standards at Chinese banks– will help banks manage credit risk and make
better loans– will reduce business risks for Chinese
companies, and improve their corporate social responsibility
– will enhance international goodwill towards China as it helps protect people and the environment around the world
Overview of Chinese Banking Sector
Role of Banks in China’s Economy
• Bank deposits represent 75% of financial stock in China, and is growing
• Bank loans are prime source of corporate financing
• Banks have a lot of money on hand (RMB 32 trillion, or 1.7 times China’s GDP)
Types of Banks
• Policy Banks– China Development Bank, China Agricultural
Development Bank, and China Export/Import Bank (Chexim)
• Commercial Banks– State-owned banks (4): China Industrial and
Commercial Bank, Bank of China, China Construction Bank, and China Agricultural Bank. Hold 50% banking assets
– Joint stock banks (12) such as: Bank of Communications, China Minsheng Bank, China Merchants Bank, Guangdong Development Bank
– City-owned banks (100+) such as: Bank of Shanghai
Banking Regulation
• China Banking Regulatory Commission– Established 2003– Mission: to protect depositors & consumers,
maintain market confidence, reduce financial crime
– Introduced loan categorization system: normal, special mention, substandard, doubtful and loss loans
Banking Regulation
• People’s Bank of China– Sets benchmark interest rates– Sets capital reserve requirements– Supervises the inter-bank market– Creates credit policies to influence lending to
particular sectors (e.g. tightening loans to overheated sectors like steel or real estate)
Key Problems in the Sector
• Non-performing loans – The result of politically-motivated lending (e.g. to
support ailing state-owned enterprises). Government estimates NPL rate at 8-9%, while others estimate it at 20-25%
• Transparency and corporate governance– Accurate and reliable information and accounting
figures are few. Corruption is a concern, and governance changes at the top may not trickle down to local branches.
Banking Sector Reform: Main objectives
• Bank restructuring– purge non-performing loans inject ailing banks with
capital, particularly in the Big Four commercial banks (RMB 3.6 trillion since 1998)
• Financial liberalization– gradually allow prices to be determined by the market,
and open the sector to foreign competition
• Better governance– Strengthen financial regulation and supervision,
improve risk management, corporate governance, and disclosure; adopt international standards
Foreign Bank Involvement
• Foreign banks are opening more local branches– 71 foreign banks from 20 countries operating in China
(end of 2005) to make loans mostly to businesses
• A few foreign banks are locally incorporating their branches as subsidiaries
• Strategic ownership stakes in Chinese banks– Foreign ownership capped: 20% for a single investor,
25% maximum foreign owned– Examples: RBS and Bank of China; Bank of America
and China Construction Bank; Citigroup and Guangdong Development Bank
Profiles of A Few Chinese Banks
China Export-Import Bank
China Development Bank
China CITC Group
Industrial & Commercial Bank of China
China Export-Import Bank
• Specializes in aiding Chinese companies overseas
• Credits for export sellers:– 35% high tech; 33% offshore construction & overseas
investment projects; 17% ships; 12% mechanical and electronic products
• Lending– Transportation 39%; municipal construction 20%;
11% electric power; industry 10%
• Reportedly has environmental standards, but no one has seen them
China Development Bank
• CDB beginning to expand into overseas investments, for example– Kazakhstan: cooperation with Kazakhstan
Development Bank for oil-related investments– Zimbabwe: loans in exchange for minerals– Uzbekistan: 20 million USD credit line for national
Bank for Foreign Economic Activity– Indonesia: energy investments, one of the key
investors in Indonesian oil palm development– Russia: developing dams, pulp mills, and oil pipelines
in Russian Far East. • CDB has environmental policy in which projects
must be on SEPA’s approved list before receiving financing
China CITIC Group
• Large financial conglomerate which owns CITIC Bank• Financing profile:
– Financial sector accounts for 81% of total assets.– Industry (information, infrastructure, energy, real estate) accounts for
about 18%
• Foreign joint-ventures – CITIC Pacific (HK) is involved in: power generation, communications,
aviation, civil infrastructure, steel manufacturing– CITIC Resources Holdings (HK) is involved in: plywood, aluminium,
coal, oil and base metals in China, Australia and other countries– CITIC Australia focuses on resources and primary industries. It has
significant investments in Portland Aluminum Smelter and Australian Coal Industry.
– CITIC Canada invests in pulp mills, lumber mills, and owns Sundance Forest Industries Ltd, a logging and lumber processing company.
Industrial & Commercial Bank of China
• Big Four bank, publicly traded – Goldman Sachs 6%; Dresdner/Allianz 2.5%
• #1 lender in China, 100 overseas branches
• Lending profile: 50% to corporations– 20% manufacturing; 11% transportation &
telecommunications; 9% power, gas & water – Within China: 22% Yangtze River Delta, 20%
Bohai Rim, 14% Northeast, 13% Central