CDB Officially Launches Shareholding Company

China Development Bank Corp. (CDB) was officially launched here on Tuesday, as the bank is transforming itself into a commercial organization.

As one of the three major policy banks, CDB's move was a major step in China's financial reform.

With a registered capital of 300 billion yuan (44.12 billion U.S. dollars), the new corporation inherited all the assets, liabilities and business of the original bank, which was set up in 1994 to organize financing for infrastructure projects and major industrial development.

Central Huijin injected 20 million U.S. dollars in December 2007 to facilitate the reform of the bank. The reform schedule got approval from the cabinet, the State Council, in February this year.

The Ministry of Finance and Central Huijin are CDB's two shareholders, holding 51.3 percent and 48.7 percent stakes, respectively.

At the end of 2007, CDB had 320 billion yuan of net assets and 2.89 trillion total assets. It had 2.26 trillion yuan in loans, of which less than 1 percent were non-performing.

CDB's non-performing loans only increased slightly this year because of the May 12 earthquake in Southwestern China's Sichuan Province, but remained under 1 percent. It has been reducing its bad assets and non-performing loans for 17 consecutive quarters by the first three months of 2008.

After the reform, CDB would have a better position in business including mid-term and long-term loans, infrastructure loans, as it had rich experience in financing these projects, said Guo Tianyong, professor with Central University of Finance and Economics. But it lacks business outlets and the experience of retail banking, and has less diversified sources of funding, said Guo.

As a policy bank, CDB used to raise money mainly by issuing state-backed bonds to other financial institutions. But after the bank goes commercial, these bonds will be less attractive as they will no longer have a credit rating equal to government bonds.

This change will make it more difficult and expensive for the bank to raise money, said analysts.

Our bank is actively contacting investment banks and other general partners and limited partners, in an effort to make further innovations in our marketing and commercial operations, CDB official Xiao Yanzong said.

As for when the CDB will go public, Guo believed it would be complicated to get a former policy bank onto the stock market as a commercial bank.

Source: CRIEnglish