Exporting National Champions CHINA S OFDI LENDING IN COMPARATIVE PERSPECTIVE AMOS IRWIN AND KEVIN P. GALLAGHER

Transcription

1 Exporting National Champions CHINA S OFDI LENDING IN COMPARATIVE PERSPECTIVE AMOS IRWIN AND KEVIN P. GALLAGHER

2 Summary What is OFDI finance? How much is China lending? $140 billion from How does that compare to others? Much more than Japan or Korea as a percent of total OFDI, either past or present (And nobody else gives much at all) What is the purpose? Primarily natural resource acquisition

3 What is OFDI finance? Lending to Chinese companies to support overseas foreign direct investment (OFDI) YES: Lending $2 billion to Chinalco to purchase a mine in Peru NO: Export subsidies, export credits, overseas contracting loans

4 What is OFDI finance? Lending to Chinese companies to support overseas foreign direct investment (OFDI) YES: Lending $2 billion to Chinalco to purchase a mine in Peru NO: Export subsidies, export credits, overseas contracting loans Why do it at all?

5 What is OFDI finance? Lending to Chinese companies to support overseas foreign direct investment (OFDI) YES: Lending $2 billion to Chinalco to purchase a mine in Peru NO: Export subsidies, export credits, overseas contracting loans Why do it at all? Acquire resources and technology Enter new markets Industrial adjustment

6 Methodology Bank reports Newspaper reports Company reports Financial reports Confirmed by multiple sources

7 How much? $ million Chinese OFDI Finance

8 Who is lending? OFDI Loans Loans to LAC Bank Amount ($m) Percent Amount ($m) Percent CDB $92, % $68, % Ex- Im $34, % $8, % BoC $12, % ICBC $4, % Total $144, % $86, %

9 Who is borrowing? State-owned enterprises 96% Private enterprises 4%

10 How does that compare? Amount ($b) % of GDP % of OFDI China % 58.0% Japan % 15.6% Korea % 20.3%

11 How does that compare? Amount ($b) % of GDP % of OFDI China % 58.0% Japan, % 12.2%

12 Comparing interest rates Country Borrower Rate Year Japan Yen rate 0.88% 2011 China Chinalco L+0.01% 2008 Japan $ rate L+0.25% 2010 Japan $ rate L+0.44% 2004 China TCL L+0.6% 2004 Japan Yen rate 2.50% 2005 China Huawei L+2% 2009 China CNOOC 4.05% 2006

13 What is the purpose? Sector Amount ($m) Percent Oil $45, % Mining $28, % Infrastructure $10, % Manufacturing $3, % Services $2, % Agriculture $1, % Tex^les $ % Total $92, %

14 What is the purpose? Natural resource acquisition Infrastructure: energy, telecom Supports exports of infrastructure goods and services Technology acquisition: M&A Machine tools, cars, chemicals, oil

15 Japan s stages of OFDI finance Stage 1: Natural resource acquisition Stage 2: Industrial adjustment Stage 3: Advanced industrial adjustment Market access Stage 4: 2000 Present M&A, natural resource acquisition

16 Purpose comparison Japan, China By sector Amount ($m) Percent Amount ($m) Percent Mining and Oil $2, % $73, % Infrastructure $10, % Manufacturing $5, % $3, % Services $2, % Agriculture $ % $1, % Tex^les $ % $ % Other $ % $0 0.00% Total $8, % $92, %

17 Purpose comparison Japan China By sector Amount ($m) Percent Amount ($m) Percent Mining and Oil $63, % $73, % Infrastructure $19, % $10, % Manufacturing $19, % $3, % Services $8, % $2, % Agriculture $ % $1, % Tex^les $ % $ % Other $29, % $0 0.00% Total $140, % $92, %

18 Analysis China is lending far more than Japan or Korea ever did (as a percent of total OFDI) Why?

19 Analysis China is lending far more than Japan or Korea ever did (as a percent of total OFDI) Why? NOT because of less access to foreign/private capital

20 Analysis China is lending far more than Japan or Korea ever did (as a percent of total OFDI) Why? NOT because of less access to foreign/private capital Less moral hazard with state-owned enterprises Though they are far from easy to control

21 Analysis China is lending far more than Japan or Korea ever did (as a percent of total OFDI) Why? NOT because of less access to foreign/private capital Less moral hazard with state-owned enterprises Though they are far from easy to control Enormous savings, forex reserves

22 Analysis China is lending far more than Japan or Korea ever did (as a percent of total OFDI) So what?

23 Analysis China is lending far more than Japan or Korea ever did (as a percent of total OFDI) So what? OFDI finance leads OFDI, so expect OFDI increase Right now focused on natural resources Most powerful SOEs concentrated in natural resources But the government may move to stage 2 like in Japan

24 Summary We estimate China s OFDI finance since 2002 at $140 billion This is far more than Japan and Korea as a percent of OFDI China s OFDI finance goes mainly to acquire natural resources There are also energy and telecom loans China loans more because it has more control over its borrowers, the SOEs In addition to high savings and forex reserves

25 Questions? Thank you!

26 Number Parent company Project Year 1 Shanghai Baosteel Group Shanghai Baosteel Group Shanghai Baosteel Group China National Petroleum (CNPC China National Petroleum (CNPC China Minmetals Group China Minmetals Group China Minmetals Group TCL TCL Huawei Technologies Zijin Mining Group Zijin Mining Group Zijin Mining Group SAIC Chery Automobile SAIC Chery Automobile SAIC Chery Automobile Jiangxi Copper Aluminium Corporation of China Aluminium Corporation of China Aluminium Corporation of China Haier Group Wuhan Iron and Steel Co Ltd (W Wuhan Iron and Steel Co Ltd (W China National Chemical (Chem China National Chemical (Chem China National Chemical Engine State Grid Corporation Chongqing Grain Group Goldwind Science and Technolo Goldwind Science and Technolo Aviation Industry Corporation o Three Gorges Corporation Three Gorges Group China Huadian Corporation Huaneng Huaneng Huaneng Zhejiang Geely Holding Group (G Zhejiang Geely Holding Group (G China Petroleum and Chemical ( China International Trust & Inve CITIC, Anshan, Baosteel, Shoug China National Offshore Oil Cor Sinochem Sinochem China Merchants Group Sinosteel Sinosteel Jiangsu Jinsheng Industry Anshan Iron and Steel Shenyang Machine Tools Co Dalian Wanda Group Shanxi Tianli Enterprises China National Machinery Indus China National Technical Import Wuxi Suntech Ltd Sichuan Hanlong High-Tech Dev 2010 Amount ($m) Source CDB CDB BoC CDB 4200 CDB 500 CDB 2000 Ex-Im 732 Ex-Im 976 CDB 600 Ex-Im 1200 CDB 1430 BoC 350 CCB 6580 CDB 500 CDB 2000 BoC 1000 CDB 2310 CDB CDB 428 CDB 960 CDB 86 Ex-Im 1000 CDB 1560 CDB 1540 ICBC 6000 CDB Ex-Im 2048 CDB 4000 CDB 144 Ex-Im 2000 BoC 300 CCB 1000 BoC 800 CDB Could Will use use Sector Purpo se Foreign Owne Funding rship Access? No Steel A SOE Y No Steel A SOE Y No Steel A SOE Y Oil A SOE Y Oil A SOE Y 2000 Ex-Im Mining A SOE Y Mining A SOE Y Mining A SOE Y No Manufacturing C SOE Y No Manufacturing C SOE Y No Infrastructure C PrivateY Mining A SOE Y? Mining A SOE Y? No Mining A SOE Y? 610 Ex-Im No Auto C SOE N No Auto C SOE N 1430 Ex-Im No Auto C SOE N Mining A SOE Y? 2000 Ex-Im Mining A SOE Y? Mining A SOE Y? Mining A SOE Y? 1500 Ex-Im No Manufacturing C SOE Y No Steel A SOE N Steel A SOE N 25 Wuhan Iron and Steel Co Ltd (W Ex-Im No Steel A SOE N Chemical B SOE N Chemical B SOE N Infrastructure C SOE N Infrastructure C SOE N Agriculture A SOE Y No Manufacturing C SOE Y No Manufacturing C SOE Y No Manufacturing C SOE Y Infrastructure C SOE N No Infrastructure C SOE N Infrastructure C SOE Y 5000 Ex-Im Infrastructure C SOE Y Infrastructure C SOE Y Infrastructure C SOE Y Auto B PrivateY Auto B PrivateY 42 China Petroleum and Chemical ( Ex-Im No Oil A SOE Y 7240 CDB 1710 CDB 1365 CDB 1987 Ex-Im 230 CDB 700 Ex-Im 350 CDB 1120 CDB 1320 Ex-Im No No Oil Oil Steel Oil Oil Chemical Infrastructure Mining Mining A A A A B C C A A SOE SOE SOE SOE SOE SOE SOE SOE SOE Y Y Y Y Y Y Y? Y Y CDB Manufacturing B PrivateN 1200 Multiple Steel A SOE N CDB Manufacturing B SOE N 2600 Multiple Entertainment C PrivateN 39.6 Ex-Im Textiles D SOE N 3000 Ex-Im 1500 Ex-Im No No Manufacturing C Manufacturing C SOE SOE N N CDB 140 Ex-Im No Infrastructure Mining C A PrivateY PrivateN