Development Of China's Policy Banks In Transition

After the World War II, one of the most important measures that developing countries took to make up the market failure and promote economic growth was to establish development banks. Those development banks serve as macro-economic management tools, both have the advantages of government and market, aiming at supporting the countries'economic and social development.China Development Bank (CDB) was established in 1994. Over the past 13 years, CDB has contributed enormously to the growth and development of the Chinese economy. Nearly a decade ago, CDB's activities were limited to relieving bottlenecks related to China government-directed funding of infrastructure projects through policy lending, and became the most significant source of debt financing for infrastructure projects. Nowadays, the challenges which CDB encounter make it necessary to transform the bank to market-oriented financial institution.China completed its WTO transition period in December 2006 and has begun an era of opening its financial markets to foreign competition. In the 3rd National Finance Conference held in January 2007, one of the key agenda items was the reform of policy banks. CDB is a pacesetter in this reform.Along with the globalization of finance, liberalization of finance, and financialization of economy, development banks all over the world start their market-oriented reform, not only take advantage of capital market to solve the problem of funding source and application more frequently, but also introduce a variety of commercial business to broaden their development space, which can be used for reference.This paper firstly reviews the history of development bank in China; and then explains why the market-oriented reform is urgent to CDB. At last, this paper discusses the possible realization path of the market-oriented reform of CDB.