THIS FINANCIAL PUSH IS FOR REAL
The economic sector that produces goods and services coasts on innovative help from commercial banks, other financial institutions
Outside the ambit of corporate spotlights, without seeking to hog the limelight, China’s financial institutions, or FIs, are quietly bringing about a revolution in the way critical funding reaches the real economy.
Ever since President Xi Jinping said, during the two-day National Financial Work Conference in July, that serving the real economy is the bounden duty and purpose of FIs, innovative lending has accelerated, bolstering the part of the economy that produces goods and services.
The scope of this financial renaissance extends far beyond the shores of China.
An outstanding instance obtains in the Caribbean island of Jamaica.
On Oct 6, at 9 pm local time, Alpart’s alumina processing plant, which was resurrected by a Chinese firm, produced its first batch of alumina products in eight years.
Owned by the Alumina Partners of Jamaica, or Alpart, the plant was formerly under United Co Rusal PLC, a Russian aluminum producer, which shut it in 2009 due to losses caused by a decline in demand for alumina and a sharp rise in costs.
And it lay shut until June 21 when Jiuquan Iron and Steel (Group) Co Ltd, or JISCO, which bought it out from Rusal for $299 million last year, re-opened it to turn it around.
The acquisition was made possible by a $170 million loan that JISCO received from the China Development Bank, a Beijing-headquartered development FI.
It was as if the CDB could anticipate President Xi’s call to strengthen the financial sector’s capabilities to serve the real economy, which he gave at the 19th National Congress of the Communist Party of China last week. That call followed his directive earlier that FIs should channel more resources into major areas and weak segments of economic and social development.
Thanks to the acquisition of Alpart, JISCO’s aluminum smelting subsidiary in Gansu province will receive 1.65 million metric tons of alumina annually for electrolytic aluminum production.
Yu Zhipeng, senior manager of the general affairs department of JISCO Alpart Jamaica, said, “Apart from raw material supply, the acquisition of Alpart will drive the domestic alumina market, which is picking up gradually. It will also promote cooperation between JISCO and potential partners in Jamaica by introducing advanced Chinese technologies to Jamaica and leading China’s alumina-related industries to the Caribbean country.”
The CDB served as liaison between JISCO and the government of Jamaica, conducted research, and coordinated on-site investigations before the takeover.
In addition to the first loan, the bank pledged a further $150 million to help Alpart restore production and improve its production capacity.
Post the acquisition, JISCO started developing an industrial eco-system in Jamaica involving a new industrial park, where a wide range of products, including 3.65 million tons of alumina, 450,000 tons of electrolytic aluminum and 600,000 tons of cement, would be made, said Li Jianjiang, deputy managing director of the CDB’s Gansu branch.
“Total investments in the industrial park are expected to go beyond $2 billion, and the CDB will take the lead in providing financing for its construction,” Li said.
Just like the CDB, many other banks, large and small, have stepped up support for the real economy.
For instance, China Construction Bank, the nation’s second largest commercial lender by assets, offered a $11.2 million loan to Zhongpin Food Co Ltd, an agricultural product processer and food manufacturer in Henan province, via a cross-border financing service.
Ben Baoke, director of Zhongpin Food, said, “The service helped lower our annualized financing cost by 40 basis points to 3.95 percent, compared with the one-year benchmark lending rate of 4.35 percent during the same period.”
In addition to lending, CCB took various measures to support the food manufacturer.
CCB International (Holdings) Limited, an investment services company owned by the bank, contributed 130 million yuan ($20 million) to a contract fund that invested in the equity of Zhongpin Food, paving the way for the company to list on China’s A-share market.
The bank also offered online financing services to high-quality upstream and downstream compa-