China's Superbank: Debt, Oil and Influence - How China Development Bank is Rewriting the Rules of Finance
Anyone wanting a primer on the secret of China's economic success need look no further than China Development Bank (CDB)which has displaced the World Bank as the world's biggest development bank, lending billions to countries around the globe to further Chinese policy goals. In China’s Superbank, Bloomberg authors Michael Forsythe and Henry Sanderson outline how the bank is at the center of China's domestic economic growth and how it is helping to expand China's influence in strategically important overseas markets.
100 percent owned by the Chinese government, the CDB holds the key to understanding the inner workings of China's state-led economic development model, and its most glaring flaws. The bank is at the center of the country's efforts to build a world-class network of highways, railroads, and power grids, pioneering a lending scheme to local governments that threatens to spawn trillions of yuan in bad loans. It is doling out credit lines by the billions to Chinese solar and wind power makers, threatening to bury global competitors with a flood of cheap products. Another $45 billion in credit has been given to the country's two biggest telecom equipment makers who are using the money to win contracts around the globe, helping fulfill the goal of China's leaders for its leading companies to "go global."
Bringing the story of China Development Bank to life by crisscrossing China to investigate the quality of its loans, China’s Superbank travels the globe, from Africa, where its China-Africa fund is displacing Western lenders in a battle for influence, to the oil fields of Venezuela.
- Offers a fascinating insight into the China Development Bank (CDB), the driver of China's rapid economic development
- Travels the globe to show how the CDB is helping Chinese businesses "go global"
- Written by two respected reporters at Bloomberg News
As China's influence continues to grow around the world, many people are asking how far it will extend. China’s Superbank addresses these vital questions, looking at the institution at the heart of this growth.
Chapter 1 Let 10,000 Projects Bloom 1
The Wuhu Model 4
The Chongqing Model 9
Global Financial Crisis 12
A Town Called Loudi 15
Li's Story 18
"Manhattan" in China 22
Credit Risk in a One-Party State 26
Cracks in the System 29
Chapter 2 Turning a Zombie Bank into a Global Bank 39
A Life in the Party 41
The Princeling Party: The Beginning of State Capitalism 50
Taking Over a Basket Case 55
Transforming CDB from an ATM Machine 58
Developing a Slogan 62
Beating the Commercial Banks 64
Gao Jian: Creating a Market for "Risk-Free" Bonds 68
The West Self-Destructs: The Financial Crisis 72
Moving Beyond Wall Street 75
Chapter 3 Nothing to Lose but Our Chains: China Development Bank in Africa 85
Made in Ethiopia 90
Ethiopia's Zone: Exporting to the West 94
China-Africa Development Fund: The State's Private Equity Arm 96
Rising Role of China in Africa 101
Fixed Capital: Western-Style Lending 105
African Tiger: Can Ghana Escape the Resource Curse? 108
Fresh Capital 116
Chapter 4 Risk versus Reward: China Development Bank in Venezuela 123
Default in Bolívar's Country 125
China's Venezuelan Adventure 126
Loans for Oil 132
Cars, Housing, and Gold: Good Business for China 136
China in the Backyard of the United States 141
Chapter 5 Funding the New Economy 147
Obama's Dream 151
Default-Free Bond Market 153
Financing China's Global Company: Huawei 157
The Final Frontier: Private Equity 163
Acting as a Gatekeeper 167
Imprint of the State 169
Chapter 6 The Future 175
About the Authors 181
HENRY SANDERSON has been a reporter for Bloomberg News since April 2010. Prior to that, he was a reporter for the Associated Press in Beijing and Dow Jones in New York. While at Bloomberg, Sanderson has covered corporate finance, focusing on China's banks, the bond market, and the emergence of the yuan as an international currency. He is a graduate of the University of Leeds (with a BA in Chinese and English literature) and Columbia University (with a Master's in East Asian Studies).
MICHAEL FORSYTHE has been a reporter and editor for Bloomberg News since 2000. Prior to that, he was an officer in the U.S. Navy for seven years, serving on ships in the U.S. 7th Fleet. The highlight of his career in Washington was overseeing Bloomberg's coverage of the historic 2008 presidential election. Since returning to Beijing in 2009, Forsythe has focused on policy and politics, with particular emphasis on the international impact of "China Inc." He is a graduate of Georgetown University (with a BA in International Economics) and Harvard University (with a Master's in East Asian Regional Studies).
"Despite CDB’s central role in developing China’s economy and bankrolling the international expansion of Chinese companies, China’s biggest policy lender rarely makes an appearance in most English-language chronicles of the country’s economic rise. All the more reason then to praise a superbly researched new book, written by two Beijing-based reporters for Bloomberg, in which CDB finally makes a star turn."
"Lifting the veil on one of global finance’s least understood institutions, the book is essential reading for anyone seeking insight into the workings of Chinese state capitalism." -- China Economic Quarterly, March 2013
Reviewer: Erica Downs of the Brookings Institution
"China's economy sometimes seems the work of miracles: three decades of economic growth, with GDP compounding at an annual rate of around 10%; the world's highest levels of savings and investment; vast trade surpluses, which feed the largest foreign-exchange reserves in history. The financial system has played a key role in delivering these economic feats, and no single institution within it has been more important than China Development Bank. "Understand CDB," Henry Sanderson and Michael Forsythe write in "China's Superbank," "and you understand the core of China's state capitalism." -- Wall Street Journal review, Feb 27, 2013
"The book is another useful insight into the workings of the Chinese state apparatus to come out of the Bloomberg bureau in Beijing – in July it printed an exposé about the family finances of Xi Jinping, and its website has been blocked since. One of the most striking aspects of the CDB story is how the bank managed to balance being a state-owned company with maintaining sufficient independence to function as a commercial business." -- Irish Times
"Calls for reform in China tend to come in two kinds – one, the most common in Chinese social media and popular discussion, calls for a crackdown on endemic forms of local tyranny, such as land seizures, black prisons, and bribery. The other, found among liberals within the Party and expatriate businessmen, talks about rolling back the growing dominance of the state and state-owned companies over the Chinese economy, opening more markets to competition and ending the practices that allow state-owned (or state-blessed) companies to command cheap access to capital, natural resources, and land. So far, Xi Jinping's term looks promising for advocates of the first but the book [China's Superbank: Debt, Oil and Influence – How China Development Bank is Rewriting the Rules of Finance] makes a case that land seizures are at the very foundations of China's model of state capitalism." -- The Diplomat
China's rise as a global economic superpower, the success of its top companies, and its continuing domestic boom is intricately tied to China Development Bank. This less-than-transparent institution, which is wholly owned by the Chinese government, has become the financial enabler of the nation's growth and is arguably the most powerful bank in the world. While development banks have long existed to financial political projects, infrastructure, and other initiatives, nothing comes close to China Development Bank in scope. Bloomberg journalists Henry Sanderson and Michael Forsythe explores China Development Bank’s hallmark innovation which has transformed China’s landscape in just over a decade by pumping trillions of yuan into various domestic projects.
In the new book, China’s Superbank: Debt, Oil and Influence – How China Development Bank is Rewriting the Rules of Finance, the authors combine on-the-scene reporting and interviews from across the world with numbers crunched from Chinese bond prospectuses to tell the story about that bank. “We are both Chinese-speaking accredited journalists working in Beijing. As such, we have access to conferences and political events,” the authors said.
This book reveals how the Chinese economy really works, and how its state policy bank is influencing world trade and politics. Understanding it will help you convey the complexity of China's financial system.
China’s Superbankoffers substantial material that is exclusive and never been reported, and will bring the story of China Development Bank to life by crisscrossing China to investigate the quality of its loans.
Throughout the book, Sanderson and Forsythe:
- Profile Chen Yuan, the Chairman of CDB since 1998, and discuss how he's been instrumental in reasserting the Communist Party in China's economy, while managing to preserve enough independence from the government to make decent investment decisions and function as a commercially driven institution
- Analyze CDB's China-Africa Development Fund—China's largest private equity fund investing in Africa—and its attempts to stimulate manufacturing in Ethiopia, and CDB's lending to Ghana
- Address CDB's work to secure a steady flow of oil and gas to China through loans-for-energy deals around the world, particularly to Venezuela
- Examine CDB's lines of credit that have helped new Chinese firms in telecom and alternative energy win significant global projects, as well as how the bank is developing a new form of private equity financing through CDB Capital.
As China’s influence continues to grow around the world, many people are asking how far it will extend. China’s Superbank addresses this vital question, looking at the institution at the heart of its growth.
About the book:
Debt, Oil and Influence - How China Development Bank is Rewriting the Rules of Finance
by Henry Sanderson and Michael Forsythe
A Bloomberg Press imprint, an imprint of Wiley
Published in October 2012; Hardcover and e-book; 201 pages; US $49.95
(Available at all major bookstores and where e-books are sold)
About Bloomberg Press
Since 1996, Bloomberg Press has published books for financial professionals as well as books of general interest in investing, economics, current affairs, and policy affecting investors and business people. Titles are written by well-known practitioners, BLOOMBERG NEWS® reporters and columnists, and other leading authorities and journalists. Bloomberg Press books have been translated into more than 20 languages.
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