This is an update of the 2012 presentation at https://www.slideshare.net/WorldResources/emerging-actors-in-development-finance-a-closer-look-at-chinas-overseas-investment When it comes to overseas development finance, China is definitely a country to watch. Due to the country’s unprecedented economic growth, China’s overseas investments have increased exponentially in recent years. Between 2009 and 2010, two Chinese state-owned banks lent more money to other developing nations than the World Bank did. In fact, between 2002 and 2011, China’s outward foreign direct investment (OFDI) stock grew from $29 billion to more than $424 billion. But what factors are driving all of this growth? What areas of the world are on the receiving end of China’s OFDI flows? And what sorts of social and environmental standards are in place for banks’ and enterprises’ investments? WRI answers these questions and many more in its recently updated powerpoint presentation "Chinese Development Finance: A Closer Look at Chinese Sustainable Finance."

1. A Closer Look at Chinese Sustainable Finance
CHINESE DEVELOPMENT
FINANCE

2. Introduction
South-South financial flows are changing the
nature of development finance. Starting in 2010,
two Chinese state-owned banks (China
Development Bank and Export-Import Bank of
China) annually lent more money to overseas
developing countries than the World Bank.
During the recent financial crisis, Brazil invested
$10 billion in International Monetary Fund bonds,
a striking example of the country’s transformation
from a debtor to creditor. Expanding South-South
trade and investment provides welcome and
needed sources of capital for countries in Africa,
Asia, and Latin America. At the same time, these
financial flows – coupled with the emergence of
powerful financial actors from China, India,
Brazil, and other economies – may pose new
challenges for environmental and social
sustainability.
Source: WRI Sustainable Finance based on figures from United Nations Conference on
Trade and Development and United States Bureau of Economic Analysis
0
100
200
300
400
500
600
1980 1990 2000 2005 2010 2013
* Adjusted for inflation
Global Outward Foreign Direct Investment
(OFDI) Stock from Emerging Economies
(in US$ billion)*
South Africa India Brazil China

3. 75%
68%
31%
18%
13%
5%
8%
23%
16%
14%
10%
2004 2013 2013 (excluding
OFCs*)
China Goes
Global: OFDI
China’s outward foreign direct investment (OFDI)
flows increased from US$1.2 billion in 1990 to
US$94.6 billion in 2013, while its OFDI stock
grew from less than US$7 billion in 1990 to
US$575 billion in 2013.
As reported by China’s Ministry of Commerce
(MOFCOM), China’s OFDI stock is largely
concentrated in Asia, although investment has
increased significantly in Latin America and
Africa over the past five years. MOFCOM figures
assign flows based on initial offshore destination,
not final destination. This may lead to
overestimation of amounts to certain regions
such as Asia and Latin America. The graph at the
far right excludes money initially flowing to
offshore financial centers such as Hong Kong
and the Cayman Islands to give a clearer picture
of where money might ultimately land.
Source: WRI Sustainable Finance based on MOFCOM 2013 Statistical Bulletin of China’s
Outward Foreign Direct Investment
Geographical Distribution of China’s OFDI Stock,
2004 and 2013
Asia
Latin
America
Europe
North
America
Africa
Oceania
*OFC=Offshore
Financial Centers,
including Hong Kong,
Singapore, Cayman
Islands, British Virgin
Islands, and
Luxembourg

4. Source: WRI Sustainable Finance based on 2013 Statistical Bulletin of China’s Outward
Foreign Direct Investment
Continental Distribution of China’s OFDI Stock, 2013
13%
4%
North America
Latin America 4%
Africa
8%
Europe
68%
3%Asia
Oceania

5. Source: WRI Sustainable Finance based on 2013 Statistical Bulletin of China’s Outward
Foreign Direct Investment
National Distribution of China’s OFDI Stock, 2013

6. China’s OFDI Stock v. Loans to
Domestic Enterprises: Comparison
of Sectors, 2012
Manufacturing
27%
Transportation
Storage & Post
13%
Information
Technology
12%
Environmental &
Public Facilities
9%
Production &
Supply of
Utilities
9%
Real Estate
8%
Other
22%
Loans to Domestic
Enterprises
Outward FDI
Stock• By the end of 2012, 90% of China’s OFDI was invested in six
sectors; leasing & business services alone accounted for 33%.
Part of the investments in leasing & business services were
reinvested to other industries through offshore financial
centers. Many major mergers and acquisitions occurred using
money that initially flowed through Hong Kong. For example,
China Petroleum & Chemical Corporation (Sinopec) acquired
30% of Galp Energia (Brazil) and Galp Energia (Netherlands)
through its Hong Kong subsidiary.
• Mining was the third largest industry receiving overseas
Chinese investment, reflecting resource-seeking incentives.
According to China’s industry classification standard, mining
includes oil and natural gas extraction.
• Compared to China’s OFDI, a large part of China’s loans to
domestic enterprises were invested in the manufacturing sector,
as China accounted for 22.4% of world manufacturing in 2012,
the largest in the world.
Source: WRI Sustainable Finance based on 2012 Statistical Bulletin of China’s Outward
Foreign Direct Investment, and 2013 Almanac of China’s Finance and Banking.
Leasing &
Business
Services
33%
Finance
18%
Mining
14%
Wholesale & Retail
Trade
13%
Other
10%
Manufacturing
6%
Transportation
Storage & Post
6%

7. Enabling Policies
• China’s decades-long rapid growth has made it the second largest economy in the world after United States, when it
surpassed Japan in mid-2010.
• A major factor contributing to China’s growth has been its integration into the global economy, a catalytic step in the
country’s economic development. China’s transformation from “isolated” to “globalized” is a direct result of the government’s
desire to spur and maintain lasting economic growth.
• In 2001, China’s Tenth Five-Year Plan (2001-2005) formalized the directive for Chinese companies to “Go Global,” a
strategy to gain access to needed resources, stimulate the export of goods, and promote China’s multinational business and
brands. Beijing has provided diplomatic support, favorable tax exemptions, insurance, and, critically, access to low-cost
finance.
• In 2011, China’s Twelfth Five-year Plan (2011-2015) emphasized the “Go Global” policy, especially promoting overseas
investment and cooperation in energy resources, research and development, and agriculture industries. It also asked that
overseas Chinese companies commit to social responsibility principles and practices benefiting local communities.
• In 2014, the National Development and Reform Commission (NDRC) issued a new approval and record-keeping policy to
decentralize approval procedures, further facilitating the “Go Global” policy. Companies investing overseas no longer need
approval from NDRC if the investment is less than $1 billion.
• Also in 2014, MOFCOM relaxed overseas investment rules for Chinese firms. Under the new rules, only investments in
countries or regions and industries identified as “sensitive” will require the ministry’s approval. Other investments, regardless
of size, need only file paperwork for record-keeping purposes.

8. Source: WRI Sustainable Finance based on 2012 Statistical Bulletin of China’s Outward
Foreign Direct Investment and United States Bureau of Economic Analysis
Note: Adjusted for inflation. 2014 OFDI flow is a projection by WRI.
0
20
40
60
80
100
120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
2000: “Go Global”
strategy was
officially announced,
and formalized in
the 5th Session of
the 15th CPC
Central Committee
Meeting.
2004: The Decision of the
State Council on Reforming
the Investment System
changed the approval
procedure of China’s outward
investment. Deals less than
$100 million no longer need
NDRC’s approval.
2006: State
Administration of
Foreign Exchange
removed the limit
on use of foreign
exchange for
overseas
investment.
2014: NDRC issued new approval
and record keeping policy to
decentralize approval procedures
for overseas investment.
MOFCOM also simplified its
approval process, and most
domestic firms no longer need
MOFCOM’s approval.
2009: MOFCOM
issued Measures for
Overseas Investment
Management to
decentralize and
simplify approval
procedures for
overseas investment
Policies and China’s OFDI Flow (US$ billion)

9. 613
146
71 53 25 17
1,163
527
262
143
236
108
16
-
200
400
600
800
1,000
1,200
1,400
EIB WBG IDB AsDB EBRD AfDB China Germany Brazil Japan China Japan United States
Multilateral
Development
Banks
National
Development
Banks
Export
Credit
Agencies
Note: "EIB" = European Investment Bank. "WBG" = World Bank Group. "IDB" = Inter-American Development Bank. "AsDB" = Asian Development Bank. "EBRD" = European Bank
for Reconstruction and Development. "AfDB" = African Development Bank.
China Goes Global: Bank Lending
Outstanding Loans of MDBs, NDBs, and ECAs, 2013 (USD billion)
Source: WRI Sustainable Finance based on annual reports from public financial institutions
Rather than primarily seeking finance through capital markets, Chinese companies obtain 80-90% of their funding from
Chinese banks. As part of the “Go Global” strategy, The Chinese government mobilized state-owned policy banks, largely
the Export-Import Bank of China (China Exim) and the China Development Bank (CDB), to facilitate international capital
flows and support mergers and acquisitions of foreign companies. Although not the largest in terms of total assets and
domestic investment compared to Chinese commercial banks, China Exim and CDB play the leading role in overseas
investment. Other state-owned banks, such as China Export and Credit Insurance Company, have also contributed on a
smaller scale.

10. China Goes Global:
China Development
Bank
1.9%
4.7%
8.8%
16.2%
-6.0%
-1.0%
4.0%
9.0%
14.0%
19.0%
0
50
100
150
200
250
2005 2006 2007 2008 2009 2010 2011 2012 2013
CDB’s Overseas Loans (in US$ billion)
CDB's Overseas Outstanding Loans
Share of CDB's Overseas Loans as Percentage of CDB's Total Loans
Formed in 1994 along with China Exim,
China Development Bank (CDB) is a state-
owned policy bank that provides financing
to key infrastructure projects and industries
in China. It also supports the “Go Global”
strategy by facilitating China’s cross-border
investment.
In 2008, CDB was restructured into a
commercial joint stock bank, but remains
under state control. CDB is now the fifth
largest bank in China by total assets, equal
to US$ 1.3 trillion in 2013.
CDB’s business presence has extended to
116 economies across the globe. By the
end of 2013, 15.92% of CDB’s outstanding
loans were located outside mainland China.
Source: WRI Sustainable Finance based on annual reports from China Development Bank

11. China Goes Global:
Export-Import Bank
of China
The Export-Import Bank of China (China Exim)
was formed in 1994 along with two other policy
banks - the China Development Bank and the
Agricultural Development Bank of China- to
promote specific government-sanctioned policies
and finance. As a policy bank, China Exim
finances and implements the government’s trade
and overseas investment policies. The Bank is
under the direct leadership of the State Council.
China Exim provides supplier credits to promote
China’s export of goods and services, including
overseas contracting projects and investments.
The business objective of China Exim is to
implement national policies (e.g. promote “Going
Global”) rather than to make profits; thus, loan
interest rates are much lower than those of
average commercial loans.
Source: WRI Sustainable Finance based on annual reports from The Export-Import Bank of
China
0
10
20
30
40
2006 2007 2008 2009 2010 2011 2012 2013
China Exim Annual Actual Disbursement of Export
Sellers’ Credits, 2006-2013 (USD billion)
Other Export Supplier's Credit
Overseas Investment and Contracting Projects

12. Chinese Banking Regulation:
China Banking Regulatory Commission
• In 2003, China Banking Regulatory Commission
(CBRC) was formed as an independent agency to
oversee the Chinese banking system, following the
establishment of a separate securities regulator and
an insurance regulator in 1992 and 1998, respectively.
CBRC is charged with writing the rules and regulations
governing banks in China. China used to have a mono
banking regulation system, with the People’s Bank of
China, the central bank, regulating and supervising the
entire financial sector since its creation in 1984.
• In 2007, CBRC issued Guiding Opinions on Credit
Support for Energy Conservation and Emission
Reduction (Green Credit Policy). According to the
Green Credit Policy, banks cannot provide credits and
loans to certain types of projects, e.g. highly polluting
industries. It also recommended that banks manage
environmental risk by classifying projects into three
groups according to their environmental impacts.
• In 2010, CBRC issued Opinions on Providing Financial
Services to Further Promote Energy Conservation,
Emission Reduction and Elimination of Outdated
Production Capacity. Banks were given explicit
instructions to support energy conservation and
emissions reduction, and eliminate highly polluting and
inefficient industries.
• In 2012, CBRC issued Green Credit Guidelines. The
guidelines provide systematic guidance for banks to
manage environmental and social risks, including (1)
organization management, (2) policy, system and
capacity building, (3) process management, (4)
internal controls and information disclosure, and (5)
monitoring and examination.
• Please note that these guiding opinions are not
necessary consistently applied or enforced laws.

13. Regulating OFDI
• Chinese authorities have simplified regulations to
facilitate investment abroad. Three governmental
bodies – MOFCOM, State Administration of Foreign
Exchange (SAFE), and National Development and
Reform Commission (NDRC) – have primary but not
sole oversight of China’s overseas investment
(separate from foreign assistance) regime.
• MOFCOM is responsible for developing regulations
for outward investment and for coordinating
activities with commercial counselors posted at
Chinese embassies.
• SAFE issued new regulations in 2009 that reduced
qualification requirements for offshore foreign
currency lending and expanded the sources of funds
for lending, including access to government foreign
exchange reserves.
• NDRC reviews large outbound investments to
ensure they align with the country’s political interest
and overall economic development policy.
• China Banking Regulation Commission (CBRC) and
State-owned Assets Supervision and Administration
Commission (SASAC) also play oversight roles.
Risk management guidelines issued by CBRC in
2008 opened the door for Chinese banks to provide
loans for merger and acquisition purposes
previously forbidden under a 1996 regulation. They
require banks to perform due diligence on a number
of risk factors including operations, compliance, and
commercial risks.
• MOFCOM, China Securities Regulation Commission
(CSRC), CBRC, and People’s Bank of China have
all worked with Ministry of Environmental Protection
to formulate relevant policies and regulations.

14. Environmental and Social Standards for
Foreign Investments
2004 2005 2007 2008 2012 2013
Brief environmental
guidelines by
Export-Import Bank
of China (China
Exim): Impact
assessments,
monitoring, and
project impacts
review required
China
Development Bank
(CDB) states it has
an environment
policy, but the policy
is not publicly
available.
China Exim
significantly expands
environmental
guidelines
China adopts a
Green Credit Policy
restricting lending
available to polluting
companies
Guide on
Sustainable
Overseas
Silviculture by
Chinese enterprises
introduced standards
for activities in forest
ecosystems
SASAC* issued
Corporate Social
Responsibility Guide
Opinion for state-
owned enterprises.
Landmark Open
Government
Information
Regulations and
Measures for
Environmental
Information
Disclosure went into
effect
Industrial Bank
became the first
Chinese Equator
Principles financial
institution
China Banking
Regulatory
Commission (CBRC)
introduced new
Green Credit
Guidelines, calling for
improved
management of
environmental and
social risks.
MOFCOM/ MEP
issued Guidance on
Environmental
Protection in
Foreign Investment
and Cooperation,
requiring compliance
with Chinese and host
country laws, greater
transparency,
community
consultation, and
grievance
mechanisms
Note: “SASAC” = State-Owned Assets Supervision and Administration Commission

15. Spotlight on Chinese Investments in Africa

16. 0
5
10
15
20
25
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
China's OFDI Stock in Africa
(US$ billion)
China's OFDI Stock to Africa (US$ billion)
CHINA’S OFDI FLOWS AND
STOCK IN AFRICA, 2004 TO
2013
China’s OFDI in Africa is accelerating rapidly; its
OFDI stock on the continent increased from $1
billion in 2004 to $24.5 billion in 2013. Annual OFDI
flows increased from around $400 million in 2004 to
$3.2 billion in 2013.
China’s OFDI in Africa was widely distributed among
various sectors. Financial sector OFDI to Africa in
2012 was $-1.10 billion, meaning the net amount of
Chinese investment decreased, or was withdrawn in
2012. This is partly because financial investments
were influenced by market values and fluctuated
significantly. Non-financial sector OFDI reached
$3.61 billion, with a year-on-year increase of 24.7%.
Source: WRI Sustainable Finance based on MOFCOM 2013 Statistical Bulletin of China’s
Outward Foreign Direct Investment
Note: In billions of inflation-adjusted US dollars and current
exchange rate

17. CHINA’S OFDI STOCK IN AFRICA
BY DESTINATION BY THE END
OF 2013
By the end of 2013, 4% of China’s OFDI
stock, or $26.2 billion, was in Africa. The
top eight African recipients accounted for
61% of China’s OFDI stock on the
continent. Those countries are marked in
yellow in the figure to the right.
South Africa alone received 22% of
China’s OFDI in Africa as of 2013. The
primary reasons for its popularity appear to
be its relatively well-developed
infrastructure, a stable political
environment, and a relatively large
domestic market.
Source: WRI Sustainable Finance based on MOFCOM 2013 Statistical Bulletin of China’s
Outward Foreign Direct Investment
Note: This chart indicates the initial destination of OFDI, as
reported by MOFCOM; the final destination is undetermined.

18. Mining
31%
Finance
20%Construction
16%
Manufacturing
15%
Leasing and
business
services
5% Other
13%
CHINA’S OUTWARD FDI STOCK
IN AFRICA BY INDUSTRY BY
THE END OF 2011
More than 2,500 Chinese companies have
directly invested in Africa, with business
including natural resource extraction,
finance, infrastructure, power generation,
textiles, and home appliances. Recently, the
finance industry was responsible for a large
portion of OFDI because of Industrial and
Commercial Bank of China’s $5.6 billion
deal in 2007 to buy 20% of South Africa’s
Standard Bank.
Returns on investment by Chinese
companies in Africa are reportedly higher
than in other developing countries: from 24%-
30% compared to 16%-18%, according to the
China’s Ministry of Foreign Affairs.
Source: China-Africa Economic and Trade Cooperation 2013 White Paper
Note: According to China’s industry classification standard, mining
includes oil and natural gas extraction.

19. WRI’s Work
WRI’s work on Chinese sustainable
finance is led by the Sustainable Finance
Team. The goal of this research is to
improve the environmental, social, and
climate change policies governing
investments, and to work with local
communities and civil society
organizations impacted by the
investments to more effectively engage
with emerging economies.

20. A WRI Influence Strategy
Investor Country
(China & Brazil)
Strategy
Engage policymakers to develop environmental and
social guidelines to govern overseas investments
Engage companies and financial institutions to
develop and implement environmental and social risk
management policies.
Build the capacity of local civil society organizations to
create demand for stronger environmental and social
guidelines.
International
Strategy
Enhancing the roles of emerging actors in
international and bilateral investment standards
setting
Host Country
Strategy
Work with host country governments and local civil
society organizations to facilitate stronger
environmental and social performance among foreign
companies
Inform
decision-
makers of
potential
environmental
and social
impacts on the
ground
Create
enabling
conditions
for local
communities
to raise
concerns
directly with
decision-
makers