China's Superbank

HENRY SANDERSON has been a reporter for Bloomberg News since April 2010. Prior to that, he was a reporter for the Associated Press in Beijing and Dow Jones in New York. While at Bloomberg, Sanderson has covered corporate finance, focusing on China's banks, the bond market, and the emergence of the yuan as an international currency. He is a graduate of the University of Leeds (with a BA in Chinese and English literature) and Columbia University (with a Master's in East Asian Studies).MICHAEL FORSYTHE has been a reporter and editor for Bloomberg News since 2000. Prior to that, he was an officer in the U.S. Navy for seven years, serving on ships in the U.S. 7th Fleet. The highlight of his career in Washington was overseeing Bloomberg's coverage of the historic 2008 presidential election. Since returning to Beijing in 2009, Forsythe has focused on policy and politics, with particular emphasis on the international impact of "China Inc." He is a graduate of Georgetown University (with a BA in International Economics) and Harvard University (with a Master's in East Asian Regional Studies).

"Despite CDB’s central role in developing China’s economy and bankrolling the international expansion of Chinese companies, China’s biggest policy lender rarely makes an appearance in most English-language chronicles of the country’s economic rise. All the more reason then to praise a superbly researched new book, written by two Beijing-based reporters for Bloomberg, in which CDB finally makes a star turn.""Lifting the veil on one of global finance’s least understood institutions, the book is essential reading for anyone seeking insight into the workings of Chinese state capitalism." -- China Economic Quarterly, March 2013Reviewer: Erica Downs of the Brookings Institution"China's economy sometimes seems the work of miracles: three decades of economic growth, with GDP compounding at an annual rate of around 10%; the world's highest levels of savings and investment; vast trade surpluses, which feed the largest foreign-exchange reserves in history. The financial system has played a key role in delivering these economic feats, and no single institution within it has been more important than China Development Bank. "Understand CDB," Henry Sanderson and Michael Forsythe write in "China's Superbank," "and you understand the core of China's state capitalism." -- Wall Street Journal review, Feb 27, 2013 "The book is another useful insight into the workings of the Chinese state apparatus to come out of the Bloomberg bureau in Beijing – in July it printed an exposé about the family finances of Xi Jinping, and its website has been blocked since. One of the most striking aspects of the CDB story is how the bank managed to balance being a state-owned company with maintaining sufficient independence to function as a commercial business." -- Irish Times "Calls for reform in China tend to come in two kinds – one, the most common in Chinese social media and popular discussion, calls for a crackdown on endemic forms of local tyranny, such as land seizures, black prisons, and bribery.  The other, found among liberals within the Party and expatriate businessmen, talks about rolling back the growing dominance of the state and state-owned companies over the Chinese economy, opening more markets to competition and ending the practices that allow state-owned (or state-blessed) companies to command cheap access to capital, natural resources, and land. So far, Xi Jinping's term looks promising for advocates of the first but the book [China's Superbank: Debt, Oil and Influence – How China Development Bank is Rewriting the Rules of Finance] makes a case that land seizures are at the very foundations of China's model of state capitalism." -- The Diplomat

• Preface ixAcknowledgments xixChapter 1 Let 10,000 Projects Bloom 1The Wuhu Model 4The Chongqing Model 9Global Financial Crisis 12A Town Called Loudi 15Li’s Story 18“Manhattan” in China 21Credit Risk in a One-Party State 26Cracks in the System 29Chapter 2 Turning a Zombie Bank into a Global Bank 39A Life in the Party 41The Princeling Party: The Beginning of State Capitalism 50Taking Over a Basket Case 55Transforming CDB from an ATM Machine 58Developing a Slogan 62Beating the Commercial Banks 64Gao Jian: Creating a Market for “Risk-Free” Bonds 68The West Self-Destructs: The Financial Crisis 72Moving Beyond Wall Street 75Chapter 3 Nothing to Lose but Our Chains: China Development Bank in Africa 85Made in Ethiopia 90Ethiopia’s Zone: Exporting to the West 94China Africa Development Fund: The State’s Private Equity Arm 96Rising Role of China in Africa 101Fixed Capital: Western-Style Lending 105African Tiger: Can Ghana Escape the Resource Curse? 108Fresh Capital 116Chapter 4 Risk versus Reward: China Development Bank in Venezuela 123Default in Bolívar’s Country 125China’s Venezuelan Adventure 126Loans for Oil 132Cars, Housing, and Gold: Good Business for China 136Ecuador 139Russia 140China in the Backyard of the United States 141Chapter 5 Funding the New Economy 147Obama’s Dream 151Default-Free Bond Market 153Financing China’s Global Company: Huawei 157The Final Frontier: Private Equity 163Acting as a Gatekeeper 167Imprint of the State 169Chapter 6 The Future 175About the Authors 181Index 183