Banking Across Borders: Are Chinese Banks Different?

By Eugenio M Cerutti, Catherine Koch, Swapan-Kumar Pradhan

November 13, 2020

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Eugenio M Cerutti, Catherine Koch, and Swapan-Kumar Pradhan. Banking Across Borders: Are Chinese Banks Different?, (USA: International Monetary Fund, 2020) accessed November 23, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We explore the global footprint of Chinese banks and compare it with that of other bank nationalities. Chinese banks have become the largest cross-border creditors for almost half of all emerging market and developing economies (EMDEs). Their global reach resembles that of banks from advanced economies (AEs). We take a nationality approach as international banks, and Chinese banks in particular, grant a substantial share of their cross-border loans from affiliates located abroad. But differences remain. Using a gravity model with a novel measure of distance capturing the role of foreign affiliates across all bank nationalities, we find that larger distances deter cross-border bank lending to EMDEs more than to AEs. For Chinese banks, however, distance deters lending to EMDEs less than for peer EMDE banks. We show that for all banks combined, bilateral economic interactions like trade, FDI and portfolio investment, positively correlate with lending. Chinese banks’ lending to EMDEs also strongly correlates with trade, but not with FDI and, unlike other banks, it correlates negatively with portfolio investment.

Subject: Balance of payments, Bank credit, Cross-border banking, Financial institutions, Financial services, Foreign banks, Foreign direct investment, Money, Portfolio investment

Keywords: Bank credit, Bank lending, Borrower country, Chinese bank, Chinese banks, Cross-border banking, Cross-border lending, EMDE borrower, FDI, Foreign banks, Foreign direct investment, Global, Gravity model, Lending bank, Parent country, Portfolio investment, Portfolio investment, Trade, U.S. dollar, WP

Publication Details

Pages:

47
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2020/249
Stock No:

WPIEA2020249
ISBN:

9781513561226
ISSN:

1018-5941

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