China Development Bank (CDB), one of the country’s major policy lenders, will play a big role in supporting the urbanization drive of the world’s most populous nation, in keeping with its basic overall charter of being an engine to power the government’s economic development policies.
The bank, which is under the direct jurisdiction of the State Council, will allocate at least 60 percent of its new loans to projects related to China’s new-style urbanization plan, and encourage the use of social funding to support the government policy, it said in a statement on Dec 17.
CDB had given 6 trillion yuan in loans to finance China’s urbanization process in the past. About 3.4 trillion yuan, or 71 percent, of its outstanding loans at the end of 2012 were directly linked to urban development programs.
Hu Huaibang, party secretary and chairman of the bank, said pushing urbanization is not only key to incubating new economic growth spots, it is also an important means to help China tackle the so-called middle income trap.
The central government has recognized the bank’s role in pushing urbanization in the past decades. Under the latest national plan, CDB will continue to support local government funding needs, as well as establish a stable and sustainable financing mechanism for urbanization across the nation.
China’s urbanization ratio is expected to increase by another 20 to 30 percentage points in the coming twenty years, with another 300-400 million people moving into the cities. That will result in more than one billion people living in urban areas in the country.
In May, CDB said the nation needs at least 50 trillion yuan in new investment by 2020 to implement the urbanization plan. The money is needed to bring the urban population share to 60 percent by 2020 and increase the benefits for the almost 200 million migrant workers already living in cities, CDB’s president Zheng Zhijie said.
The country must urgently find special financing channels to support the urbanization process because local governments can’t afford the spending, Zheng said.
The government aims to build new cities across the central, western and northeastern regions to help them become fresh growth engines for the national economy. Unlike previous urbanization plans which involved building new cities and moving people from the rural areas, the new-style urbanization will focus on human-centered approach to deal with the problem of rural poverty.
At an urbanization conference recently, officials pledged to develop “diverse and sustainable” funding mechanisms to finance their work. Attention must also be paid to the environmental impact of such development, they said.
– Contact the reporter at [email protected]