Chinese lenders have stepped up and more than doubled their volume on non-Chinese loans since 2013.
China lays groundwork for global leadership
During the 19th National Congress of the Chinese Communist Party last week, President Xi Jinping said China is driven to comprehensively deepen the nation’s reform, while further expanding its footprint across the globe. So far, 49 projects have been implemented under the country’s One Belt One Road Initiative (OBOR), an ongoing strategy to connect Eurasia. Aligning with OBOR, Chinese banks have also expanded beyond the Great Wall by participating on non-Chinese loans— nearly doubling their global volume from $294.7bn in 2013 YTD to $529.3bn so far this year.
Project financing at home, refinancing abroad
In line with government goals, the business scope of Chinese banks vary across regions. In China, their focus is project financing,* which made up 54.8% of their domestic lending volume in 2017 YTD. Outside of China, they seek to build relationships with specific borrowers globally. They are mainly acting as part of syndicates on refinancing deals, which accounted for 63.9% of their overseas lending volume so far this year.
In EMEA, their refinancing push is particularly noticeable. 71 of the 127 EMEA loan deals funded by Chinese lenders in 2017 YTD were used for refinancing. In addition, 80.2% of the Chinese-funded EMEA loan volume is investment-grade, indicating the banks have a relatively risk-averse approach to lending abroad.
Chinese lenders steadily grow market share in EMEA
China’s three main banks—Bank of China, ICBC, and China Construction Bank—have been actively lending in EMEA with steady growth in market share over the last 3 years. While 10 more Chinese-funded EMEA loans were done in 2017 YTD compared to last YTD, 38 less deals were funded by Chinese lenders in APAC (ex-Japan).
Though Chinese banks are expected to continue their perpetual dominance over foreign banks in their domestic market, the growing trend of Chinese banks spreading loans across other world regions is set to continue. Recent foreign policy priorities and further implementation of the OBOR Initiative will only reinforce their global influence.
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Data source: Dealogic, Xinhuanet, as of October 31, 2017
*For this analysis, project financing includes deals where use of proceeds is project financing and/or capital expenditure.