China will reportedly allocate $62 billion of its foreign exchange reserves to three state-owned “policy banks” in order to support its New Silk Road project, aimed at creating infrastructure links with foreign markets.
The project called 'One belt, One road', also known as the New
Silk Road, includes plans to build roads, ports, railway systems
and other infrastructure from China into the Middle East,
Central, South and Southeast Asia to create demand for China’s
industrial exports, as it already sees oversupply at home.
The People’s Bank of China will direct $32 billion to China
Development Bank (CDB) and $30 billion to Export-Import Bank of
China (EXIM), the Caixin magazine said in a report on its
website. The third bank to receive cash from China's central bank
is Agricultural Development Bank of China (ADBC); another
state-owned bank that supports the farming sector.
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The capital injection will be carried out through converting
entrusted loans into stakes, the journal said, adding that the
People's Bank of China will become the second largest shareholder
in the China Development Bank and the biggest shareholder of the
EXIM bank.
Chinese government said last week it had approved the reform
plans for CDB, Exim Bank and Agricultural Development Bank
proposed by the Central Bank in attempts to advance finance
projects amid the current economic slowdown.
The government has been saying for years it intended to transform
these three policy banks into commercial institutions, but little
progress has been seen.
Policy banks in China do not accept deposits and fund themselves
mainly by selling bonds carrying an explicit government
guarantee. The banks sell bonds in Yuan within China and USD
bonds in the offshore market.
The foreign exchange reserves of China, considered the worlds
largest, fell by $110 billion to $3.7 trillion in the first
quarter of 2015.
China had previously used part of its foreign currency reserves
to recapitalize major state-run banks, help them restructure and
list their shares.