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China Development Bank Leads The Way in Financing for Science and Technology

The China Development Bank (CDB), one of the country’s three major policy banks, has stepped up its medium- and long-term financing support for science and technology enterprises.

From January to April this year, the CDB issued science and technology loans worth 40.6 billion yuan (about $5.7 billion), among which 16.3 billion yuan (41% of total science and technology loans) went to support the development of integrated circuits, mechanical equipment and industrial automation, basic materials, new energy technology applications, biomedicine and other fields, Xinhua reported May 25.

China does have a Confucian-Hamiltonian physical economic-financial system, though not a Hamiltonian bank. In the main, some of the Confucian-Hamiltonian principal features are that the China National Development and Reform Commission and the State Council intensely debate out—sometimes for months—and make decisions on which projects to invest in for both its domestic infrastructure, industry and agriculture, and for overseas in the Belt and Road Initiative, especially in Africa.

Aside from what large-scale projects China finances through its national budget, the nation’s three policy banks—the China Development Bank, the Export-Import Bank of China, and the Agricultural Bank of China, all of which operate under the State Council—finance through loans. The state-run China Development Bank, created in 1994, is the most important of the three policy banks. For example, it has raised funds for projects such as the Three Gorges Dam. Further, in 2016, China issued a plan for the Yangtze River Economic Belt, which consists of nine provinces and two cities that cover approximately one-fifth of China’s land. The CDB is a principal source of funding for this.

Aiding the process by providing loans are the four major commercial banks: the Industrial and Commercial Bank of China, the Agricultural Bank of China, the China Construction Bank, and the Bank of China (not to be confused with central bank, the People’s Bank of China). These are, by asset size, the world’s four largest commercial banks in the world.

The growth of CDB financing of China’s science and technology, indicates that China’s financial system orients towards what it identifies as a “knowledge- and innovation-based economy.” Compare that to the rampant speculation which vectors the banking systems of the United States and Europe, and ask yourself, who knows more about actual capital formation?