In general, China’s policy banks (China Development Bank and China Ex-Im Bank) finance a specific subset of Latin American countries. Argentina, Brazil, Ecuador and Venezuela have been a focus of Chinese lending in the region since 2005. In Latin America and elsewhere in the world, Chinese lending is considered to be both profit-driven and a form of diplomacy.
Chinese lending activity in Latin America tends not to overlap considerably with that of international financial institutions. In general, China’s state banks give loans to different countries and focus on energy, mining, and infrastructure. Loans from China are also typically bigger 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, for example. And Portugal’s BES paired with CDB on a loan to Venezuela.
Chinese president Jiang Zemin first publicly 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 $35.6 billion in 2010.
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