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    Book Review: China’s Superbank: Debt, Oil and Influence – How CDB is Rewriting the Rules of Finance

    China's Superbank: Debt, Oil and Influence - How China Development Bank is Rewriting the Rules of Finance (Bloomberg)

    Most of the prevailing wisdom about China declares that its economic success is due to a combination of government policy and foreign direct investment. This book, China’s Superbank:Debt Oil and Influence – How China Development Bank is Rewriting the Rules of Finance, goes quite a bit further in lifting the fog behind China’s success first domestically, and now, internationally.

    The authors, who are journalists working with Bloomberg, make it very clear from the beginning that there is no bank in the world which is quite like CDB (China Development Bank). It is a policy bank wholly-owned by the Finance Ministry of the People’s Republic, which is controlled by the Chinese Communist Party, China’s sole ruling political party. It stands where policy, finance and commercial lending. It does not have a public relations department, and it doesn’t hire non-Chinese. New hires must not be only well-educated and smart, but they also need political criteria set by the Chinese Communist Party.

    China Development Bank has an impeccable pedigree. Its founding chairman, Chen Yuan, is the son of China’s economic policy head under Mao Zedong, Chen Yun. Chen Yuan has set China’s expansionist policy overseas by:

    • Setting up the China-Africa Development Fund under CDB to direct Chinese investments into developing African economies, and to insure that Chinese companies get ground-floor opportunities in Africa;
    • In South America, it has set up “loans for oil” deals with the governments of Venezuela, Brazil and Ecuador;
    • Directed loans to new industries such as photovoltaic cell manufacturing by offering favorable loan terms;
    • Offered loans on favorable terms to favored companies such as Huawei and Chery;

    These are just a few examples mentioned in the book.

    Because of its largely secretive nature, it is seldom mentioned outside of the financial community; there is no desire on CDB’s part to make itself known outside Chinese government and the financial community. In Africa and South America, the authors had to get much of their information from interviewing local government officials and business partners.

    While many western analysts like to divide Chinese companies into public (Chinese state-owned) and private companies, in practice, CDB does not make this kind of differentiation. But the financing funds it provides are very much from the state. As a policy bank, it looks very much not only at the company’s commercial ties and health, but also how support will help to further China’s strategic interests.

    In this key respect, CDB is very different from western investment and commercial lenders. The US, with its huge financial industry, does not have a single policy or investment bank which is so tightly aligned with government policy the way CDB is. It also makes it clear why opposition to having a US industrial policy would make it impossible for the US to have such a bank.

    After reading this book, the reader will have a good idea of why western competition against the expansion of Chinese commercial interests are so futile.

    China has an extra tool in its toolbox which the west simply doesn’t have: China Development Bank.

    You can order the book by clicking the image above; it is available in Kindle and print editions. Ordering and shipping are handled by Amazon US.