2nd UPDATE:CHINA CONGRESS:CDB:Chinalco Deal Not Government-Ordered
March 06 2009 - 6:35AM
Dow Jones News
State-owned China Development Bank Corp., which is likely to be
a leading financer of Aluminum Corp. of China's US$19.5 billion
investment in Anglo-Australian miner Rio Tinto PLC (RTP), said
Friday that any funding for Chinalco would be "based purely on
commercial interests" and wouldn't be directed by the
government.
The expected role by CDB - which is owned by China's Ministry of
Finance and the sovereign wealth fund China Investment Corp. - in
the financing of Chinalco's deal has complicated the review of the
transaction by the Australian government and raised concerns
Chinese government interests are behind it.
Australian Treasurer Wayne Swan told CIC Chairman Lou Jiwei last
month that Australia is open to foreign investment so long as the
investment is in the national interest.
CDB President Jiang Chaoliang, who was speaking with a select
group of reporters in a rare interview during the National People's
Congress, China's annual legislative session, said any
national-interest concerns due to CDB's government background are
unwarranted.
"The business relation between CDB and Chinalco is purely based
on commercial interest," Jiang said.
He said CDB is just one of China's state banks that are
interested in cooperating with Chinalco.
"Any bank in China would love to do business with a good client
like Chinalco...CDB isn't an exception," he said.
CDB and Chinalco haven't yet signed a final agreement about
funding, Jiang said.
But even if a financing deal is struck, CDB "wouldn't have any
power to intervene in how Chinalco would use the money, as long as
it is used safely. It will be totally up to Chinalco's management
to decide," said Jiang, the former chairman of state-run Bank of
Communications Co.
Asked if CDB may need to borrow money from either the central
bank or CIC for financing huge deals such as Chinalco's investment
in Rio, Jiang said "No". He said the bank has "ample
liquidity."
Jiang was named to his current position in September as part of
the policy bank's transformation into a stockholding commercial
lender, after an investment vehicle under China's sovereign wealth
fund injected US$20 billion into CDB at the end of 2007 to take a
nearly 50% stake from the Ministry of Finance.
CDB was founded in 1994 under the direct supervision of the
State Council and is the country's biggest issuer of bonds behind
the finance ministry. It has been primarily tasked with supporting
China's infrastructure construction and development of backbone
industries.
Jiang said CDB's role as a major state bank that serves the
country's medium to long-term economic development remains
unchanged after the overhaul.
"In the foreseeable future CDB will absolutely remain controlled
by the government," he said.
CDB will push forward its reform plan but won't follow the model
that has been widely adopted by its state-bank peers, he said.
In recent years, Industrial & Commercial Bank Of China Ltd.,
Bank of China Ltd., China Construction Bank Corp. and Bank of
Communications, the fifth-largest lender that Jiang originally
served, all completed their stockholding reform by receiving
government capital injections, introducing foreign strategic
investors, and offering shares in Shanghai and Hong Kong.
Jiang said that, for now, CDB won't introduce any foreign
strategic investors. Instead, he said CDB will choose a right time
to introduce government-backed investors, including the National
Council for Social Security Fund, China's pension fund that sits on
roughly US$80 billion worth of assets. He didn't name any other
potential investors in CDB's reform plan.
He also said that CDB, which holds a stake of just below 3% in
Barclays PLC, has no current plan to make any fresh investments in
overseas financial institutions despite current low asset
prices.
CDB must prioritize its investments as it faces "very big
challenges" in getting good returns on its capital, a goal it wants
to achieve before it sells a stake to the pension fund, Jiang
said.
"We must allocate our capital to where we need it most," he
said.
-Victoria Ruan contributed to this story, Dow Jones Newswires;
8610 6588-5848; victoria.ruan@dowjones.com