China Exim: The bank that is banking on reform

(China Daily)
Updated: 2007-01-29 07:04

The reform of China's three policy banks was on top of the National Financial Work Conference's agenda in Beijing last week.

Earlier, these banks had been designated to help State-sector companies implement the central government's economic policies. It was a temporary arrangement in the country's transition from direct government allocation of funds during the planned era to regular loan financing in today's market economy.

China Daily reporter Zhang Lu interviewed Li Ruogu, chairman and president of Export-Import Bank of China (China Eximbank), to learn the details of the bank's imminent reform and future business.

Q: The National Financial Work Conference has decided to reform the three policy banks. As China Eximbank's top leader, how do you see that happening?

A: The three policy banks have been around for 12 years. Now, all government departments have agreed that it's time these banks readjust their operations to suit the changing business environment, both at home and abroad.

The three banks have to play an important role in the market economy. But the path they take should suit their respective specialities.

Policy-based financial service is not likely to be phased out completely at this stage because it still plays a vital role in bridging the gap between urban and rural areas and in sheltering Chinese enterprises from the risks of the global market.

Financing Chinese firms in their export and import operations will continue to be part of China Eximbank's business, and, hence, be tied to government policies because the country still needs this kind of service.

It's not uncommon for a country to have an export and import bank to help its businesses.

In fact, there are about 80 export-import banks or similar institutions in more than 70 countries. Even the United States has an export-import bank, which is a key player in formulating its foreign policies.

But notwithstanding their policy-based roles, it's also important that policy financial institutions function and grow as businesses. It's true that China Eximbank is not in business to maximize its profits.

But that should not mean we don't care about the returns. And most importantly, policy-based lending should not mean low-quality business.

We can learn from our overseas counterparts' practices how to make a profit by separating the management of policy accounts from regular accounts.

The other point that I'd like to make is that under no circumstances should there be a competition for business among the leading policy institutions.

Q: Almost immediately after you took over the reins of the Eximbank in June 2005, you drew up an internal reform plan. How do you evaluate the progress you've made so far?

A: The changes we have made are encouraging.

First, we have got a new head office like other modern banks. The reorganization highlighted risk management and internal control, which in turn have borne better marketing and service results.

Second, our staff are more aware of the importance of service and returns.

Third, we managed to cut operation losses by a great margin last year.

And fourth, we have increased our support for Chinese companies in their global expansion bids, which is a new area of focus.

In the process, Chinese firms have helped the local economy of the places they are based in.

But we still have a lot more to do. We will expedite our reform to increase our global reach, grow from a bank of mainly export financing into one that finances exports and imports both and help overseas investment and the development of our firms.

Q: The central government is encouraging more imports to balance the enormous trade surplus. What role will China Eximbank play to achieve this?

A: The central government began urging institutions to increase imports at the end of last year. But our bank had already started an import-credit pilot program by then at the beginning of last year, to be precise.

In January 2006, we signed our first import-credit framework agreement for $1.5 billion to finance Shenzhen Airlines' purchase of aircraft and flight equipment.

There have been many applicants for import credits. In just one year, we arranged for 18 billion yuan ($2.31 billion).

Our import-credit business is designed to help Chinese firms buy key technologies, equipment and resources.

In due course, it will help improve the country's foreign trade balance and improve the overall level of our industrial technologies.

Q: What advantages does China Eximbank's enjoy as an institution to help the country's firms expand overseas?

A: First, unlike commercial banks, we offer various preferential loan programs. Our areas of focus are long-term credits, concessional government loans and general import-export credits with a low interest rate.

Second, we have many special loans and can offer quick, convenient and high-quality services, such as combining import-export credits with concessional and lending loans for firms shifting focus abroad.

Third, we have built an excellent team of banking professionals.

Our experience has also helped us offer a series of value-added services like consultation, risk analyses, finance planning and other support for clients to invest in unfamiliar markets.

Q: What are your bank's expansion and innovation plans?

A: We have developed rapidly on the innovation front, introducing a series of new services in the past few years. Our major efforts, apart from import credit, include:

Preparing special financing accounts for high-tech firms. This business will be started soon.

Having a business model to support small- and medium-sized enterprises (SMEs). The initial progress of our SMEs' program has been encouraging in Ningguo in East China's Anhui Province, with the city government taking and managing loans for local companies. This business model was recently expanded to five more cities and will spread across the country once it's mature.

Offering export credit to the agricultural industry. This business began in June 2006 and benefited a group of leading Chinese agricultural products' exporters.

Helping the software industry expand overseas and promoting the country's service trade in general.

(China Daily 01/29/2007 page5)

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