It may be surprising that the biggest issuer of overseas loans in the world is not the World Bank. In fact, it has recently been overtaken by the China Development Bank (CDB) in terms of the volume of loans provided to other countries.
The CDB was originally founded by the Chinese government in 1994 to support national projects such as the building of airports, bridges, and railroads. It has recently dramatically increased its global profile, however. Taking advantage of the fact that the 2008 financial crisis severely hampered Wall Street’s ability to lend overseas, the bank has used this opportunity to engage in aggressive lending outside China.
The fact that the CDB is now the world’s largest bank in terms of overseas loans, overtaking the Asian Development Bank as well as the World Bank, is ironic because China has historically been one of the greatest beneficiaries of loans from both of these institutions.
This new aggressive lending also demonstrates a shift in the bank’s activities. CDB’s lending activities overseas have marked its transition from a policy lender to more of a commercial bank. The bank’s loans have primarily been directed towards energy-related projects and concentrated in countries that are rich in natural resources, such as Venezuela, Brazil, Ecuador, Russia and Turkmenistan. As a result, CDB is now more influential than the World Bank in these countries.
Indeed, these new lending practices represent a tactic for China to both showcase its economic power and promote its economic interests abroad, including strengthening relationships with its allies. The fact that the CDB has gained more influence than the World Bank in some countries is a reminder to take note that China will likely be influencing policies and development projects all over the world to a much greater extent in the future.
– Caroline Poterio Martinez
Source: South China Morning Post
Photo: Sweet Crude Reports