Policy financing vital to economic growth
By Xu Dashan (China Daily)
Updated: 2004-02-28 12:28

China should steadily develop its policy financing business, said leading financial academic Bai Qinxian.

Bai, a famous professor at Liaoning University, said: "Development of policy financing is in line with the requirements of socialist market economic development."Policy financing plays a distinctive role in the implementation of the country's macroeconomic and financial development strategy, he said.

Bai stressed that it plays an important role in promoting economic development, increasing employment, and improving the country's international competitiveness, as well as in the social development strategy.

With China's deepening reforms and opening to the outside world, three major policy banks the Export-Import Bank of China, the China Development Bank and the Agricultural Development Bank of China have been established since the 1990s.

Bai, a veteran expert in this field, said that after almost 10 years of development, the country has set up a basic policy financing system.

The combined capital of the country's three major policy banks reached 75 billion yuan (US$9 billion) at the end of 2002 and their combined assets stood at 1.9 trillion yuan (US$230.9 billion).

"Development of policy financing is of strategic importance," Bai said. "It can't be replaced by any commercial financial organizations."

The United Kingdom was the first country to set up its own export-import policy financial organization in 1919.

Major developed countries followed suit in the 1930s and 40s.

Countries with emerging market economies also established similar financial organizations after World War II.

"Establishment of these organizations, as well as increased government support and legal protection, suggests that policy financial organizations cannot be neglected," Bai said.

Preliminary statistics show that about 80 countries have export-import policy financial organizations.

However, nearly 80 per cent of the world's total trade was conducted between more than 20 of these 80 countries.

"Foreign trade and economic activities play an important role in a country's economic development, national security, employment and social development," Bai said.

According to World Trade Organization rules, governments are not allowed to subsidize foreign trade and foreign investment companies.

But export-import policy financial institutions are still allowed to support these companies.

"These financial institutions can help their countries become more internationally competitive," Bai said.

Export-Import Bank of China President Yang Zilin said the bank had supported machinery and electronics exports, as well as high and new technology products, valued at US$131.6 billion by the end of last year.

The bank's outstanding amount of loans had reached 104 billion yuan (US$12.5 billion) by that time.

The bank will increase its support for Chinese companies planning to invest overseas, Yang said.

The China Export-Import Bank would not only provide more long-term credit with a lower interest rate for these companies in the coming years, but also help them explore more opportunities for investment in foreign countries, he said.

The bank would provide quality and highly efficient financial services for Chinese companies "going outward," Yang said.