China's Biggest Policy Bank Readies War Chest for Resource Deals

Updated on
  • CDB-backed funds target energy, minerals, executive says
  • Fan says “The timing for acquisitions is very good.”

The collapse in commodity prices has China on the prowl for acquisitions again, with the biggest policy lender joining state-backed oil giants and a gold miner in saying the time is ripe for deals.

Funds backed by the $1.6 trillion China Development Bank Corp. are buying assets overseas in industries including energy and minerals, CDB Chief Investment Officer Fan Haibin said in an interview on Friday in Beijing. Deals are aimed at securing resources rather than profits, he said. CDB isn’t making acquisitions directly, he added.

“The world economy remains in a trough, and some of the asset prices are very good,” Fan said without elaborating. “The timing for acquisitions is very good.”

China, just a few years ago the world’s dominant buyer of assets ranging from oilfields to copper mines, has been on the sidelines as concerns about its economic prospects clobbered commodities in the past year. Recent comments from PetroChina Co., China Petroleum & Chemical Corp. and Zijin Mining Group Co. suggest that could change.

Besides acquisitions through funds, CDB is providing “large” loans for some companies’ deals, Fan said. One objective is to bring new technologies and products to China, he said.

The Bloomberg Commodity Index, a basket of 22 major resource prices, has tumbled almost 30 percent in the past year.

Africa Fund

CDB backs the China-Africa Development Fund, an Africa-focused equity fund announced in 2006 by then-Chinese President Hu Jintao. Another example of where the policy bank’s money goes: a government-initiated fund to boost China’s integrated circuit industry. That last venture, set up last year, has done deals abroad recently, according to Fan.

Though oil’s plunge to six-year lows has spurred a raft of multibillion-dollar acquisitions this year, Chinese companies haven’t featured among the major buyers, data compiled by Bloomberg show. Last year’s $519 billion of energy-related deals announced globally was a record, according to the data.

“Low crude prices are a good opportunity for acquisitions,” Wang Dongjin, PetroChina’s president, said at a briefing last week. Brent, the benchmark for about half the world’s crude oil, averaged about $59 a barrel in the first half of the year, down 45 percent from the same period in 2014.

Zijin Mining, China’s most profitable gold producer, will use the slump in metals prices to accelerate overseas acquisitions, Chairman Chen Jinghe told Bloomberg Television in an interview in Shanghai that aired Tuesday.

China’s government injected $48 billion of capital into CDB, people familiar with the matter said in July, strengthening a lender that’s also accelerating domestic loans in support of Premier Li Keqiang’s efforts to arrest an economic slowdown. CDB had 10.3 trillion yuan ($1.6 trillion) of assets as of Dec. 31.

Fan didn’t provide data on his bank’s spending on overseas acquisitions. CDB bought a 3.1 percent stake in Barclays Plc in 2007 as the London-based company attempted to buy ABN Amro Holding NV. The policy bank’s current holding in Barclays isn’t publicly disclosed.

— With assistance by Dingmin Zhang

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