OREANDA-NEWS. November 27, 2013. As a product of China's reform of its investment and financing system and financial system, since it was founded, particularly since 1998, China Development Bank (CDB) has been actively exploring the strategy to serve the country's development with market-oriented approaches and so far, CDB has found a unique developmental mode of financial development that combines China's actual conditions with advanced financial models of the world.

An epitome of the reform of medium and long term investment and financing systems

CDB's development in its nearly two decades' history can be divided into three phases:

The first phase was from 1994 to 1998,  CDB was operated and managed in line with the mode of a traditional policy bank during this period. CDB was responsible for meeting the funding needs of the country's key projects and for curbing blind expansion of capital construction as it may trigger inflation. It focused on supporting the large and medium scale capital construction of infrastructural projects, basic and pillar industries and key technical renovation projects and effectively eased the restrictions of bottlenecks in economic development.

The second phase was from 1998 to 2008. It was the period that we did away with the traditional banking mode of a policy bank, actively pushed forward market-oriented reforms and explored developmental financial practices with Chinese characteristics. Under the leadership of a new term of party committee headed by Chen Yuan, we emancipated our minds and made active explorations. Starting from issuing bonds at market prices and reforming the credit system, we gradually set up a fully market-oriented operation mechanism that combined support for development with the prevention of risks. While going all out supporting the construction in key areas and weak links in China's economy, we expanded our business from the traditional support of only infrastructural projects and basic and pillar industries to also include serving the general public and international cooperation. CDB has gradually developed into a vibrant development-centered financial institution that is playing an active part in economic and social development.

The third phase started from 2008 to the present. It is a period of deepening development of the developmental finance with establishing the modern corporate governance as its core. In face of the environment of the international financial crisis and the economic downturn in China, CDB on the one hand truthfully implemented the reform program approved by the State Council by founding a joint stock company of limited liabilities and forming an organizational structure that comprises of CDB as the parent bank, a wholly-owned investment subsidiary  and a wholly-owned securities subsidiary (the only investment subsidiary wholly invested by a bank in China); on the other hand, it took active measures to counter the impact of the international financial crisis. Using its advantages and role in medium and long term investment financing, CDB guided the capital in the society to participate in maintaining growth, expanding domestic demand, adjusting economic structure, improving people's livelihood and boosting reform. All these demonstrated the important value of a developmental financial institution in serving the national strategy of a country.

So far, CDB has formed a development structure with infrastructural construction and basic and pillar industries as its main service objects, supplemented by general public and international cooperation targeted businesses. It has achieved and maintained leading market performance and has become an important and irreplaceable force in the financial system and the general economic and social development of China. It is the largest medium and long term credit bank: compared with other banks, it leads in non-personal RMB medium and long term loan business in terms of market share, which reached 18.7% by the end of June 2013. Medium and long term RMB loans account for 93.8% in its total loan business, effectively supporting the healthy development of real economy.

It is the largest bond bank: so far, it has issued an accumulated 8.86 trillion yuan of financial bonds and the current amount of outstanding bonds is 5.6 trillion yuan. It is China's largest issuer of financial bonds and has realized a virtuous circle that the bonds it issues have been selling well, well-used and well-redeemed. At the same time, it has boosted the innovative development of China's bond market, enriched the diversified financial ecosystem and promoted the safety and stability of China's financial system. It is the largest foreign investment financing cooperation bank: it has been proactively serving the national security and the general development strategy of China and has realized mutual benefits and common development with the partner countries.

Its outstanding foreign currency loans total over US\\$260 billion and its market share ranks the first among its peers. It has become a financial engine for China's "going out" strategy and has demonstrated China's financial strength in the international arena. It is the largest developmental financial institution and it acts as a bridge between the government and the market. It cultivates the development areas beyond the capacity of governmental finance or where commercial capitals are unwilling to set their feet in into matured and commercially sustainable areas and promote developmental finance to play a greater role on a broader platform. Its assets total 7.8 trillion yuan, which is in a leading position among global developmental financial institutions.

Successful practices of serving national strategies with finance

In its nearly two decades of development, CDB has made great efforts exploring effective ways to serve national strategies with financing so as to make greater contributions to the sustained and healthy development of the economy and the comprehensive progress of the society.

It has been supporting the construction of key sectors and key projects with medium and long term investment financing. It has put over 80% of its loans to basic and pillar industries such as coal, power, oil, transportation, agriculture, forestry, water conservancy and telecommunication industries and to infrastructural projects. 60% of its loans have been invested to Central and West China and to old industrial bases in NE China in order to boost the country's urbanization process, the positive interaction between industrialization and urbanization, the adjustment of economic structure and the transformation of development patterns so that the foundation can be consolidated for the further development of the nation's economy.

CDB has been improving people's livelihood and promoting social construction with inclusive financial services. It has been promoting the establishment of an inclusive financial system in which everybody enjoys equal right of financing. By the end of June, 2013, it has provided an accumulated 530 billion yuan to support the construction of affordable housing, which is over 50% of the total amount granted to this sector by all the banks in China, benefiting 7 million households, or a medium and low income population of 21.95 million. It has granted 42 billion yuan of student loans, which is over 80% of the total amount granted by all the banks in China, supporting 7.74 million students with financial difficulties. Its outstanding loans to SMEs have reached 1.8 trillion yuan, with which it has created nearly 5 million jobs.

It has been supporting China's "going out" strategy in the form of international cooperation. It has successfully operated Sino-Venezuelan Fund, Sino-Russian Oil, Sino-Pakistani Oil, Sino-Turkish Natural Gas and other major projects and has protected security of China's energy sources. It has been encouraging Chinese enterprises to "go out" to tap international markets and find their own ways of independent innovation that can lead from "Made in China" to "Created in China". It has actively carried out bilateral and multilateral financial cooperation and promoted the founding of the Interbank Consortium under Shanghai Cooperation Organization, the Interbank Consortium between China and ASEAN and the banking cooperation mechanism between the BRIC nations, all of which have provided important financial platforms for China to carry out economic cooperation with different regions in the world and have achieved multilateral win-win results.

Through years of practice and exploration, CDB has built up unique advantages in six aspects. In wholesale banking business, although it has relatively smaller number of deals, the average amount of capital in each deal and the per capita assets and profits involved are much higher compared with other banks. In terms of advance planning, it has been using planning as a way to strengthen cooperation with different parties to reach extensive consensus and form solid foundations for cooperation. In terms of pioneering and innovation, CDB has come up with the concept of developmental finance. It has built up financial platforms, promoted market-oriented operations and optimized internal operation and business mechanisms. Innovative ideas and elements can be seen in all development stages and all links of operation.

In comprehensive business, it has formed a coordinated and integrated business structure with medium and long term credit loans as its main business, supplemented by investment, bond, leasing and investment banking businesses. Its financial service instruments are getting increasingly diversified and its advantages in collaborated business is getting increasingly obvious. In risk management, it has established a credit line assessment mechanism as well as optimized and effective risk control and social supervision mechanisms to ensure that all risk management measures are fully implemented. In building a team of talents, it has adhered to the principle to make the bank into "a learning-oriented bank and a bank of experts and leaders". It has built up a team of leaders with high professional capacities and high comprehensive qualities. CDB's corporate spirit and culture can be summarized as "Devote ourselves to our country just as we devote to our families". The six advantages mentioned above are not only key in strengthening our confidence and our loyalty to CDB, they can also guarantee our success in competition, maintaining market leadership and winning the future and will help us achieve sustainable development.

Irreplaceable role in serving the transformation and upgrading of economy

China's economy has now entered a critical period of reform and transformation. General Secretary Xi Jinping has pointed out that it takes greater political courage and wisdom to seize the opportunity to deepen reform in key areas. Premier Li Keqiang also pointed out that the miracle of China's economic development has now entered the "second season" and emphases must be put on improving the quality and enhancing the efficiency of the economy.

The upcoming the 3rd Plenary Session of the 18th Central Committee  of CPC will release a general deployment of all-round deepening of reforms aiming to coordinate and promote reforms in different areas including economy, politics, culture, society and construction of ecological civilization. Among all the reforms, finance as an important driving force and a key area of reform, must strengthen its sense of innovation, accelerate its reform and transformation steps, play its important role in resource allocation and explore new ideas, new models and new ways to provide services for the nation's strategies and the development of real economy. In the face of new situation and demands, CDB will follow the principles of "serving the strategies, controlling risks and making rational profits". We will find the right approaches and contribute our wisdom and strength to improve the quality and efficiency of economic development.

We will optimize resource allocation to maintain stable development. Based on the essential demand for the financial sector to serve the real economy, we will bring into play the unique role of developmental finance in controlling the periodical fluctuation of economy. We will strengthen our support for key projects with strategic and national importance in infrastructural construction and basic and pillar industries. Priorities will be given to the capital need of the key existing and expansion projects which are included in China's 12th 5-Year Plan, such as railway, highway, energy, urban infrastructures. We will play the role as a mainstay bank to actively and steadily promote the new urbanization drive, pay high attention to scientific planning and experiment first with pilot projects before popularization. We will combine urbanization and industrial upgrading with improvement of people's livelihood, promote combination of urban and industrial developments and coordinate the planning and development of urban and rural areas in order to boost the release of potential domestic demand.

We will continue to support economic restructuring by giving support to some areas while applying restrictions on others. We will promote coordinated development of different regions, implement regional development strategies set by the central government and follow government's planning of main functional areas. We will continue to give preferential financing support to the development and reform in Central and Western China, the old industrial bases in NE China and the remote and border areas where poor and ethnic minority populations are concentrated. We will boost the leap forward development of Tibet, Xinjiang and other areas. We will promote industrial restructuring and upgrading and effectively boost development of strategic and emerging industries, energy-saving and environmental protection industries, modern service industries, old people caring businesses, cultural businesses, technological innovation and other "blue ocean" sectors and enhance the quality and efficiency of economic development.

We will strictly follow central government's industrial policies and admission standards, strictly control loans to high pollution, high energy and resources consumption industries. We will actively promote the easing of the overcapacity problem and support enterprises to develop merger, recombination and integration home and abroad through "four approaches" (increasing domestic demand, transferring some capacity to foreign countries where it is needed, encouraging acquisition, annexation, re-organization and integration of domestic and foreign enterprises and weeding out the low quality capacities). We will steadily promote international cooperation, stress win-win outcomes, optimize business structures, make full use of different markets and resources in and outside China, protect China's security in energy and resources and support strong enterprises to "go out" and cultivate overseas markets.

We will develop financial services that benefit the general public. We will explore effective ways to solve the hot and difficult problems related to people's livelihood that have attracted concern of the government, society and ordinary people, in a bid to promote social justice and harmony. We will continue to do our best to support the transformation of shantytowns, strengthen designing of financing plans according to the characteristics of different projects, optimize financing support models, give proactive guidance to social capitals and join hands to build a diversified financing system. In order to meet the development demand and solve the financing difficulties of agricultural businesses, farmers and rural areas, small and micro businesses, education and medical institutions and for poverty alleviation and disaster relief purposes, we will make great efforts to promote market, credit and system constructions to build a sustainable financing mechanism that can help the underprivileged people in the society to realize their dreams of getting out of poverty and allow more people to share the fruits of economic development.

We will deepen our own transformation and reform and promote transformation of government functions using our advantage as a developmental financial institution that acts as a bridge between the government and the market.

We will strengthen the innovation of new investment and financing models for the urbanization process and for improving people's livelihood. We will give market effective play of its basic function in resource allocation and promote government to invest more of its limited resources to social management and public services. We will facilitate financial reform, effectively promote integrated operation and differentiated development and support the construction of a diversified modern financial system. We will use our advantage as a bond bank to promote the development of bond market. We will actively participate in experiment of securitization of assets and in market-oriented reform of interest and exchange rates.

We will gradually start offering RMB loans in overseas markets, facilitate construction of offshore RMB markets, accelerate construction of cross-border payment settling systems and promote the internationalization of RMB. We will deepen reform of ourselves. We will adhere to our positioning of serving the nation's medium and long term development strategies and cooperate with related departments to find solutions to debt credit rating, capital source monitoring, supervision standards and other bottleneck problems arisen during CDB's reform and development so that CDB's ability to serve the national strategies can be further improved.

We will strengthen responsibilities management and apply strict control over risks. We must prevent the risks from industries with excessive capacities. We must increase research and analyses of the development trends of coal, ship, steel, electrolytic aluminum and other overcapacity industries, improve communication and coordination between upper stream, medium stream and lower stream links of these industries and enhance the precision in risk management. We must be cautious against the risks of excessive debts of local governments. We will cooperate with related authorities in management of local governmental debts and continue to promote standardized operation of financing platforms by local governments.

We will be stricter on loan management and promote the application of the debt-loan portfolio model to coordinate the control of debt size that is reflected by the platform. Prevent the risks of shadow banking. We must conduct credit cooperation, corporate financing, securitization of assets and other off-balance sheet businesses with scientific and cautious approaches. We must establish an optimized mechanism to separate risks of on-balance sheet businesses from those of off-balance sheet businesses and strictly prevent the contaminating effect of off-balance sheet businesses-related risks and external risks. Guard against risks in international businesses. We should deepen cooperation with different parties and strengthen analyses, research and judgment of international situations, make feasibility researches on overseas projects and scientifically design credit structures. On the basis of the above, CDB will also further strengthen its own overall risk management system, develop a risk awareness culture, build and optimize a responsibility system on risk management and enhance its sustainable development capacity with a good risk control and management mechanism.

Standing on a new starting point of reform and development, CDB will further strengthen its sense of mission and responsibility and continue to play the role as an engine for the nation's medium and long term development of real economy. It will take solid steps to promote reform and innovation, achieve first class performances and competitiveness and play a greater role in serving the nation's economic reform and transformation. It hopes to make new contributions to develop China into a comprehensively well-off society and realize the Chinese dream of the great rejuvenation of the Chinese nation.