China sets state bank policy

Ratings agency Fitch Ratings said China's State Council’s reform of the three policy banks - China Development Bank (CDB), Agricultural Development Bank of China (ADBC), and Export-Import Bank of China (ExIm) - confirmed they would remain non-commercial entities.

China has reversed plans to commercialise its state development banks as part of their reforms.

Ratings agency Fitch Ratings said China's State Council’s reform of the three policy banks - China Development Bank (CDB), Agricultural Development Bank of China (ADBC), and Export-Import Bank of China (ExIm) - confirmed they would remain non-commercial entities.

In separate directives on each bank, the State Council reversed an earlier plan in 2007 to commercialise the policy banks, which was put on hold during the 2008 global financial crisis.

Areas of responsibility have also been confirmed and clarified for each bank, with CDB as a development financial institution stabilising growth and in supporting China's rebalancing.

ExIm's mandate has been extended from its historical policy role of financing external trade to supporting domestic restructuring, as well as overseas expansion. ADBC will retain its role in agricultural development, but has been asked to segregate its policy functions and commercial activities to sustain its primary role as an agricultural policy bank.

CDB and ExIm have moved increasingly over the last few years toward promoting the expansion of Chinese enterprises overseas to acquire resources and technology, and to alleviate the pressure on excess capacity sectors.

Fitch expects the reform plans to pave the way for greater involvement by CDB and ExIm in the "One Belt, One Road" development strategy. This refers to the New Silk Road Economic Belt, which will link China with Europe through central and western Asia; and the 21st Century Maritime Silk Road, which will connect China with south-east Asia, Africa and Europe.

Fitch believes the banks are likely to take on a greater role in supporting the economy as domestic growth slows. The State Council also calls for the strengthening of capitalisation and risk management, potentially paving the way for the introduction of minimum capitalisation standards for policy institutions.

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