Until recently, China Development Bank, and to a lesser extent China Export Import Bank, were the best friends the emerging markets ever had. They lent money to companies and governments in places where the availability of capital was low, the tenure short and the cost high. They helped companies from Petrobras in Brazil to?telecoms?groups?in?Bangladesh and India, to the governments of countries in Africa and Latin America, obtain financing.
Moreover, when borrowers encountered difficulty, these were the most patient bankers. They were reluctant to seize collateral and more willing to roll over loans than their western counterparts.
But the two Chinese policy banks are now stepping back. As the Beijing government puts pressure on its banks generally, mainland credit is being tightened both at home and abroad. While speculation about credit tapering continues in the US, it is already happening in China – big time. And the consequences for parts of the rest of the world will be painful.
It used to be that one external adviser to China Development Bank would visit the bank almost every week to review up to half a dozen international projects. He would travel overseas in the entourage of the bank’s former head, Chen Yuan, until last year, receiving red carpet treatment everywhere. No longer. “The volume of international lending has dropped as much as 50 per cent,” this adviser calculates in reference to CDB.
In part the slowdown reflects more prudent lending as a result of improved project evaluation. The two banks have also become less forgiving. Rather than report a borrower as current by collecting token amounts of interest, the two have begun to act more commercially. They declare borrowers in default, take possession of the assets backing loans and sell those assets on the international markets, where they can get paid more than in China itself.
There are other signs of the tightening. For example, a banker at one of the French banks in Hong Kong says the Chinese banks are asking foreign banks to play a greater role in financing Chinese exports, since they lack the liquidity to do so (although the Chinese banks would supply a guarantee to the foreign banks for the transaction). But many foreign banks are not keen to do that because they are nervous about increasing their counterparty risk to Chinese financial institutions, especially those below the level of the big state-owned banks.
For the Chinese banks, themselves, that scaling down may be a good thing. For borrowers in emerging markets, though, it is less than ideal – especially in combination with other trends outside China.
At the same time, regulations in the developed world are also making it harder for the big international banks such as Citigroup, JPMorgan and HSBC to be as active as they used to be in channelling funds to credit-poor parts of the world.
For example, HSBC has terminated about 500 correspondent banking relationships in exactly those parts of the world that most need capital. That is because regulators require the banks not only to know their own customers but in these cases to know the customers of their customers.
Given the practical difficulties in heeding that edict, it is simpler to get out of the business. The same is true of leading competitors such as JPMorgan and Standard Chartered. The banks themselves are reluctant to talk about this in case they attract further regulatory ire and pressure from the countries from which they are withdrawing.
It is concerns about money laundering and terrorist financial flows that have led to the heightened pressure on these international banks. But the consequence is less money from outside flowing to parts of the world that desperately need it if they are to grow out of poverty.
The consequences are especially harsh because rich people in poor countries will always have access to financial services. It is the less affluent that will be the victims of these well meaning policies.
On a macroeconomic level as well as a financial?level,?China?is?also less supportive. Real GDP growth in China slowed to 1.4 per cent quarter over quarter for the three months to the end of March, according to government data published last week, while imports rose a mere 1.6 per cent for the period compared with a year ago. In the month of March, imports fell 11.3 per cent compared with March 2013.
All this suggests China’s role as the engine of growth for the world, and particularly for emerging markets, is likely to diminish in the future. And the sharper the tightening and slowdown in China is, the worse for the rest of the world. Possible replacements have yet to emerge – perhaps there are none.
直到不久以前，中国国家开发银行(CDB)和（在较低程度上）中国进出口银行(The Export-Import Bank of China)还是新兴市场有史以来最好的朋友。这两家银行为新兴市场的公司和政府提供贷款——这些地方不仅很难获得资本，而且贷款期限短、成本高。无论是巴西国家石油公司(Petrobras)、孟加拉国和印度的电信集团，还是非洲和拉美国家的政府，都在它们的帮助下获得了融资。