(Photo: Reuters / Issei Kato)
The JPY was weighed down by comments from Japan's opposition leader Abe when he stated he believes the Bank of Japan should add further support to create growth and inflation. China and Japan will conduct trade using direct currency exchanges starting from June 1.
The China Development Bank (CDB), one of the nation's three policy banks known primarily for making big loans to other state-owned entities, has begun lending large amounts of cash to private firms around Asia, reported the Wall Street Journal on Tuesday, while other banks cut back on lending amid the present economic climate.
The bank, which was established in 1994 and has total assets of more than $980 billion, loaned $2 billion to Internet firm Alibaba Holdings in June and July this year, after lending $1.8 billion to the Hong Kong Exchanges & Clearings and another $600 million to Indonesia's PT Bumi Resources in February.
According to WSJ, though the bank is not charging lower interest rates than its competitors, it is however willing to offer long-term loans for large amounts, which most commercial banks do not offer as it exposes them to heavily to a single client.
"CDB is trying to become commercially motivated," said Mike Werner, senior equity analyst at Sanford C. Bernstein (Hong Kong) Ltd. "We have already seen them moving away from its traditional policy lending to areas such as private equity. It makes sense, as CDB has cheap funding."
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China's two other policy banks, the Agricultural Development Bank of China and the Export-Import Bank of China, for the moment at least, are not straying away from their typical lending policies.
But the CDB, which is the only bank in China whose governor is a full minister, is believed to be slowly being restructured into a commercial bank, with the bank adding leasing operations and a securities unit in 2008, besides opening its first branch outside China in Hong Kong.
"If CDB were to turn into a fully fledged commercial bank, its risk profile would increase and its funding costs would rise significantly. That would make CDB less profitable overnight," warned Werner.
Still, the bank has yet to sell shares to the public, like other big Chinese lenders, and continues to raise funds for large scale Chinese infrastructure projects, including most of the funding for the Three Gorges Dam and the Shanghai Pudong International Airport.
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The bank is the second-biggest bond issuer in China, after the Ministry of Finance, and all debts are fully guaranteed by the Chinese central government. While it has had healthy profit growth, it still lags behind other Chinese commercial banks.
n 2011, the bank made $7.2 billion in profits - a relatively small sum compared to the Industrial and Commercial Bank of China for instance, who made profits over $33 billion last year, with assets worth over $2 trillion.
The article was first published by Economy Watch.