Advancing sustainable growth in the United States and China

CDB

China Development Bank

China Development Bank views sustainability in a holistic way, connecting fair and equitable economic development to protection of the environment. In December 2006, China Development Bank (CDB) became China’s first state-owned bank to join the United Nations Global Compact. Over the years, CDB has integrated the philosophy of sustainability into its reform process, strategic development and operational management. By exerting its strength in the promotion of sustainability of the economy, society and environment, CDB has also achieved excellent business results itself.

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CDB was China’s first state-owned bank to join the United Nations Global Compact (© UN)

 

The new urbanization plan centered on human needs will continue to drive China’s social and economic development. It involves household registration (“hukou”), land, financing, and institutional reforms. CDB created the “Wuhu Model” by combining its financing advantage with local governments’ ability to mobilize resources. This model is aimed at promoting people-oriented urbanization and exploring financing mechanisms to support China’s sustainable urbanization. CDB is making great efforts to achieve three objectives: turning 100 million rural migrants into urban residents, renovating shantytowns for 100 million people, and facilitating the migration of another 100 million rural laborers to central and western China. By the end of August this year, CDB had provided loans for sustainable urbanization totaling RMB 7.8 trillion on a cumulative basis, accounting for 63% of the bank’s outstanding RMB loans. CDB committed to lend RMB 1.07 trillion this year and has already lent RMB 840 billion so far. There is another RMB 2.6 trillion committed but not yet distributed. The bank is focused on building a financial system to support sustainable urbanization in the following three areas:

First, CDB will increase efforts to support shantytown renovation, achieve centralized and specialized management of residential finance, and support long-term sustainable development. The bank will build a centralized lending platform for the remaining 10 provinces and cities to achieve the goal of lending RMB 400 billion to renovate shantytowns; increase the share of monetary compensation for shantytown renovation projects from 20% to 40% of total investment; continue to improve payment, post-lending management and full process supervision; and establish differentiated credit management system, processes and methods to ensure that the use of proceeds is compliant, specified, and safe.

Second, CDB will establish an innovative financing model to support urban infrastructure construction. The bank will promote centralized credit rating, credit extension and loan repayment (“Three Centralizations”), earmarked loans, bonds and funds (“Three Earmarks”), and long-term mechanisms such as PPP, BOT, BT and government procurement of services; introduce insurance; underwrites medium term notes and high yield bonds; attract private investments; expand financing channels; and give full support to central and western China, pipeline networks of Northeast China, pollution control, industrial parks, as well as the relocation and renovation of old industrial zones and independent mines.

Third, CDB will develop an innovative investing and financing mechanism and actively promote new urbanization pilot projects. The bank will cooperate with the National Development and Reform Commission and 62 local governments to support new urbanization pilot projects in terms of making financing plans, regulating market players, developing innovative financing models, and ensuring resources and funding. CDB has an innovative financing model that combines loans with bonds. It is based on the principle of integrated planning, which means supplementing loans with bonds when necessary and extending loans or issuing bonds as appropriate. Taking advantage of this hybrid financing model, CDB can support the bond offerings by local Urban Development Investment Corporations (UDICs) cost-effectively, monitor the total debt of UDICs and local governments on a dynamic basis, and establish a long-term mechanism to boost market confidence, cut financing cost, and ensure project funds are put in place on time and in full.

Through these mechanisms, CDB has played an important role in promoting China’s sustainable urbanization by supporting urban infrastructure construction, improving urban functions, enhancing the carrying capacity of cities, strengthening support for urban industries, and promoting integrated urban and rural development. The bank has also made breakthroughs and progress in such areas as circular economy, education, health, heritage preservation, public services, and urban culture.