Banking Across Borders : Are Chinese Banks Different?

Chinese banks have become the largest cross-border creditors for almost half of all emerging market and developing economies (EMDEs). While they look closer to other EMDE banks in terms of ownership and balance-sheet structure, their global footprint resembles that of banks from advanced economies along several dimensions, especially when lending to EMDEs. We find that—even when lending via foreign affiliates—geographical distance poses a barrier for Chinese banks. For them, this barrier is lower than for other EMDE banks, more like US or European banks. We also show that across all nationalities, bilateral economic interactions, like trade, FDI and portfolio investment, all positively correlate with cross-border bank lending. What stands out is that Chinese banks’ lending to EMDEs strongly correlates with trade, similar to that of US banks, but there is no such correlation with FDI and, unlike all other banks, their lending correlates negatively with portfolio investment