Two policy banks in China, China Development Bank and the Export-Import Bank of China (China Exim Bank), have won government approval to issue US$1 billion worth of bonds respectively on overseas markets.

This will be the first time the two banks have issued such bonds since 1999.

An official with China Development Bank confirmed that the bank's plan to issue the bonds has been approved.

"But the time and the venue, as well as the underwriters, have not yet been decided," the official said, declining to give further details.

An official with the China Exim Bank, who also prefers not to be identified, said his bank will issue the dollar-denominated bonds soon.

"The scheme is in the process (of being launched)," he said.

Dong Chen, a senior analyst with China Securities, said the two banks need to issue bonds to back their business expansion.

"But if they issue the bonds on the international market, the cost will be lower," he said.

If the banks issue bonds on the domestic market, the cost will be high, because of increasing expectations of a renminbi interest rate hike, he said.

Wing Wu, chief representative of Fitch Ratings (China), said the bonds offered by the two banks should be attractive to foreign investors, as many have confidence in China's future economic growth.

"In terms of credit, it's like a sovereign," he said.

Niu Li, an economist with the State Information Center, said domestic companies and banks should be allowed to raise money through various channels.

As China's economic strength beefs up, domestic banks should be encouraged to issue dollar-denominated bonds, he said.

China Development Bank is an important lender for infrastructure projects, basic industries and pillar industries, while China Exim Bank has always given key support to the export of machinery and electronics products, as well as high technology products.

Last year, China Exim Bank helped the export of products valued at US$131.3 billion.

President Yang Zilin of China Exim Bank said his bank would also beef up support for Chinese companies which plan to invest in foreign countries in the coming years.

China Exim Bank would not only provide more long-term credit at a lower interest rate for these companies, but also help them explore investment areas in foreign countries, he said.

The bank will expand loan services to Chinese companies which engage in processing trade or contract projects in foreign countries, he said.

The bank will also provide priority credit for the export of equipment, technology and raw materials, which are demanded by overseas investment projects.

He said China Exim Bank would support Chinese project contracting, resources exploration and manufacturing businesses in countries where the Chinese Government provides preferential loans.

(China Daily June 23, 2004)