Chinese banks: Environmental Impacts and OpportunitiesMichelle Chan-Fishel Friends of the Earth US BankTrackOutline Environmental implications of Chinese banks overseas financing Overview of Chinese banking sector Profiles of a few Chinese banksEnvironmental Implications of Chinese Banks Overseas FinancingThree ExamplesOil Palm Plantations in Borneo Worlds largest proposed palm oil plantation development scheme 18 separate oil palm plantations with an average size of 100,000 hectares each Most of these 18 proposed plantations will be located in the Heart of Borneo area Headwaters of many important rivers, including Rajang, Baram Kinabatangan, Belait, Kapuas, Mahakam and Barito Biodiversity: 200 bird species, 150 reptile and amphibian species, 100 mammal species including orang-utans, elephants and rhinos, clouded leopard, sun bear, Bornean gibbons (endemic)Oil Palm Plantations in Borneo China Development Bank CITIC Group China National Constructional US$3 billion Identified as a “Priority Important Area” in the Regional Action Plan for the Conservation of Chimpanzees and Gorillas in Western Equatorial Africa Banks Export-Import Bank of China 3 year RMB 8.28 trillion line of credit (2003) Bank of China RMB 8 billion credit (2002)Environmental Opportunities High environmental financing standards at Chinese banks will help banks manage credit risk and make better loans will reduce business risks for Chinese companies, and improve their corporate social responsibility will enhance international goodwill towards China as it helps protect people and the environment around the worldOverview of Chinese Banking SectorRole of Banks in Chinas Economy Bank deposits represent 75% of financial stock in China, and is growing Bank loans are prime source of corporate financing Banks have a lot of money on hand (RMB 32 trillion, or 1.7 times Chinas GDP)Types of Banks Policy Banks China Development Bank, China Agricultural Development Bank, and China Export/Import Bank (Chexim) Commercial Banks State-owned banks (4): China Industrial and Commercial Bank, Bank of China, China Construction Bank, and China Agricultural Bank. Hold 50% banking assets Joint stock banks (12) such as: Bank of Communications, China Minsheng Bank, China Merchants Bank, Guangdong Development Bank City-owned banks (100+) such as: Bank of ShanghaiBanking Regulation China Banking Regulatory Commission Established 2003 Mission: to protect depositors adopt international standardsForeign Bank Involvement Foreign banks are opening more local branches 71 foreign banks from 20 countries operating in China (end of 2005) to make loans mostly to businesses A few foreign banks are locally incorporating their branches as subsidiaries Strategic ownership stakes in Chinese banks Foreign ownership capped: 20% for a single investor, 25% maximum foreign owned Examples: RBS and Bank of China; Bank of America and China Construction Bank; Citigroup and Guangdong Development BankProfiles of A Few Chinese BanksChina Export-Import Bank China Development Bank China CITC Group Industrial 33% offshore construction 17% ships; 12% mechanical and electronic products Lending Transportation 39%; municipal construction 20%; 11% electric power; industry 10% Reportedly has environmental standards, but no one has seen themChina Development Bank CDB beginning to expand into overseas investments, for example Kazakhstan: cooperation with Kazakhstan Development Bank for oil-related investments Zimbabwe: loans in exchange for minerals Uzbekistan: 20 million USD credit line for national Bank for Foreign Economic Activity Indonesia: energy investments, one of the key investors in Indonesian oil palm development Russia: developing dams, pulp mills, and oil pipelines in Russian Far East. CDB has environmental policy in which projects must be on SEPAs approved list before receiving financingChina CITIC Group Large financial conglomerate which owns CITIC Bank Financing profile: Financial sector accounts for 81% of total assets. Industry (information, infrastructure, energy, real estate) accounts for about 18% Foreign joint-ventures CITIC Pacific (HK) is involved in: power generation, communications, aviation, civil infrastructure, steel manufacturing CITIC Resources Holdings (HK) is involved in: plywood, aluminium, coal, oil and base metals in China, Australia and other countries CITIC Australia focuses on resources and primary industries. It has significant investments in Portland Aluminum Smelter and Australian Coal Industry. CITIC Canada invests in pulp mills, lumber mills, and owns Sundance Forest Industries Ltd, a logging and lumber processing company.Industrial Dresdner/Allianz 2.5% #1 lender in China, 100 overseas branches Lending profile: 50% to corporations 20% manufacturing; 11% transportation 9% power, gas &