China's Superbank (eBook)

HENRY SANDERSON has been a reporter for Bloomberg News since April 2010. Prior to that, he was a reporter for the Associated Press in Beijing and Dow Jones in New York. While at Bloomberg, Sanderson has covered corporate finance, focusing on China's banks, the bond market, and the emergence of the yuan as an international currency. He is a graduate of the University of Leeds (with a BA in Chinese and English literature) and Columbia University (with a Master's in East Asian Studies). MICHAEL FORSYTHE has been a reporter and editor for Bloomberg News since 2000. Prior to that, he was an officer in the U.S. Navy for seven years, serving on ships in the U.S. 7th Fleet. The highlight of his career in Washington was overseeing Bloomberg's coverage of the historic 2008 presidential election. Since returning to Beijing in 2009, Forsythe has focused on policy and politics, with particular emphasis on the international impact of "China Inc." He is a graduate of Georgetown University (with a BA in International Economics) and Harvard University (with a Master's in East Asian Regional Studies).

Preface ix

Acknowledgments xix

Chapter 1 Let 10,000 Projects Bloom 1

The Wuhu Model 4

The Chongqing Model 9

Global Financial Crisis 12

A Town Called Loudi 15

Li's Story 18

"Manhattan" in China 21

Credit Risk in a One-Party State 26

Cracks in the System 29

Chapter 2 Turning a Zombie Bank into a Global Bank 39

A Life in the Party 41

The Princeling Party: The Beginning of State Capitalism 50

Taking Over a Basket Case 55

Transforming CDB from an ATM Machine 58

Developing a Slogan 62

Beating the Commercial Banks 64

Gao Jian: Creating a Market for "Risk-Free" Bonds 68

The West Self-Destructs: The Financial Crisis 72

Moving Beyond Wall Street 75

Chapter 3 Nothing to Lose but Our Chains: China Development Bank in Africa 85

Made in Ethiopia 90

Ethiopia's Zone: Exporting to the West 94

China Africa Development Fund: The State's Private Equity Arm 96

Rising Role of China in Africa 101

Fixed Capital: Western-Style Lending 105

African Tiger: Can Ghana Escape the Resource Curse? 108

Fresh Capital 116

Chapter 4 Risk versus Reward: China Development Bank in Venezuela 123

Default in Bolívar's Country 125

China's Venezuelan Adventure 126

Loans for Oil 132

Cars, Housing, and Gold: Good Business for China 136

Ecuador 139

Russia 140

China in the Backyard of the United States 141

Chapter 5 Funding the New Economy 147

Obama's Dream 151

Default-Free Bond Market 153

Financing China's Global Company: Huawei 157

The Final Frontier: Private Equity 163

Acting as a Gatekeeper 167

Imprint of the State 169

Chapter 6 The Future 175

About the Authors 181

Index 183

"Despite CDB's central role in developing China's
economy and bankrolling the international expansion of Chinese
companies, China's biggest policy lender rarely makes an
appearance in most English-language chronicles of the
country's economic rise. All the more reason then to praise a
superbly researched new book, written by two Beijing-based
reporters for Bloomberg, in which CDB finally makes a star
turn."

"Lifting the veil on one of global finance's least
understood institutions, the book is essential reading for anyone
seeking insight into the workings of Chinese state capitalism."
-- China Economic Quarterly, March 2013

Reviewer: Erica Downs of the Brookings Institution

"China's economy sometimes seems the work of miracles: three
decades of economic growth, with GDP compounding at an annual rate
of around 10%; the world's highest levels of savings and
investment; vast trade surpluses, which feed the largest
foreign-exchange reserves in history. The financial system has
played a key role in delivering these economic feats, and no single
institution within it has been more important than China
Development Bank. "Understand CDB," Henry Sanderson and Michael
Forsythe write in "China's Superbank," "and you understand the core
of China's state capitalism." -- Wall Street Journal review, Feb
27, 2013

"The book is another useful insight into the workings of the
Chinese state apparatus to come out of the Bloomberg bureau in
Beijing - in July it printed an exposé about the family
finances of Xi Jinping, and its website has been blocked since. One
of the most striking aspects of the CDB story is how the bank
managed to balance being a state-owned company with maintaining
sufficient independence to function as a commercial business." --
Irish Times

"Calls for reform in China tend to come in two kinds - one,
the most common in Chinese social media and popular discussion,
calls for a crackdown on endemic forms of local tyranny, such as
land seizures, black prisons, and bribery. The other, found
among liberals within the Party and expatriate businessmen, talks
about rolling back the growing dominance of the state and
state-owned companies over the Chinese economy, opening more
markets to competition and ending the practices that allow
state-owned (or state-blessed) companies to command cheap access to
capital, natural resources, and land. So far, Xi Jinping's term
looks promising for advocates of the first but the book [China's
Superbank: Debt, Oil and Influence - How China Development
Bank is Rewriting the Rules of Finance] makes a case that land
seizures are at the very foundations of China's model of state
capitalism." -- The Diplomat