In general, China’s policy banks (China Development Bank and China Ex-Im Bank) finance a different set of countries than the World Bank, Inter-American Development Bank and North American and European banks. Argentina, Ecuador, and Venezuela, which have been less able in recent years to borrow in global capital markets, have been a focus of Chinese lending in Latin America. In Latin America and elsewhere in the world, Chinese lending is considered to be both profit-driven and a form of diplomacy. In addition to lending to individual governments and firms, China maintains several regional lines of credit. In 2013, Chinese President Xi Jinping announced $3 billion in funding for nine Caribbean nations. In 2014 and 2015, China announced four credit lines totaling $45 billion for approved infrastructure, manufacturing, and other projects.
Chinese lending activity in Latin America and the Caribbean does not overlap considerably with that of international financial institutions (IFIs). Chinese banks give loans to different countries and tend to focus on energy, mining, and infrastructure. In general, loans from China are also much larger than those issued by IFIs.
China Development Bank focuses on eight areas of development: electric power, road construction, railway, petroleum and petrochemical, coal, postal and telecommunications, agriculture and related industries, and public infrastructure. China Ex-Im Bank tends to offer export or import credit, loans for overseas construction contracts or investment projects, concessional loans as a form of overseas development assistance, and international inter-bank loans.
Most of China’s international lending comes from the China Development Bank (CDB) and China Export-Import Bank (Ex-Im Bank). Both were created as “policy banks” to support the government’s policy objectives. CDB generally offers higher rates than its international counterparts. China Ex-Im Bank rates are slightly lower than those of the U.S. Ex-Im Bank.
Other lenders include the State Administration of Foreign Exchange (SAFE), CITIC Group, PetroChina, Sinopec, and Chinese commercial banks ICBC, Bank of China, and China Construction Bank. Chinese policy banks have occasionally partnered with international or domestic banks when lending to Latin American governments or companies. HSBC teamed up with CDB on an infrastructure loan to Chile. Portugal’s BES paired with CDB on a loan to Venezuela.
Chinese president Jiang Zemin first championed the internationalization of Chinese investment and finance to better access large overseas markets and natural resources. Ever since, CDB and China Ex-Im Bank have supported these efforts by lending to Chinese and foreign companies overseas. Chinese banks reached new heights in international lending over the past decade. Chinese lending to Latin America reached a yearly high of $37 billion in 2010.