China Development Bank Says $8.1 Trillion Needed for Urban Shift; China must urgently find special financing channels to support the urbanization process because local governments can’t afford the spending

China Development Bank Says $8.1 Trillion Needed for Urban Shift

China needs at least 50 trillion yuan ($8.1 trillion) in new investment by 2020 to accommodate a burgeoning population of city-dwellers, according to the president of China Development Bank.

China must urgently find special financing channels to support the urbanization process because local governments can’t afford the spending, Zheng Zhijie, the bank’s president, wrote in an article in the May 16 issue of China Finance, a journal run by the People’s Bank of China. Zheng didn’t elaborate on the estimate, which is about equal to the nation’s nominal gross domestic product in 2012.

The figure shows the extent to which China will need to come up with funds for roads and benefits as part of Premier Li Keqiang’s efforts to make urbanization a key engine of growth. China Development Bank, the world’s largest policy lender, created the the nation’s system of local financing for infrastructure projects.“In the coming 20 years, China’s urbanization ratio will increase by another 20 to 30 percentage points,” with another 300 million to 400 million people moving into cities, Zheng said. “By then, China will have more than 1 billion people living in cities — the number will be larger than the population of all industrialized countries combined.”

The 50 trillion yuan is necessary to bring the urban population share to 60 percent by 2020 and increase benefits for the almost 200 million migrant workers already living in cities, Zheng wrote.

At the end of last year, 52.6 percent of China’s population lived in urban areas, according to the National Bureau of Statistics, after becoming a majority in 2011. China’s fixed-asset investment excluding rural households was 36.5 trillion yuan in 2012, according to government data.

CDB has already made 6 trillion yuan in loans to finance China’s urbanization process, with 3.4 trillion yuan of outstanding loans at the end of 2012 directly linked to urban development programs, or 71 percent of the bank’s total outstanding loans, Zheng wrote.

To contact Bloomberg News staff for this story: Xin Zhou in Beijing at xzhou68@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: