IFC Project Highlights in China

Energy Efficiency

ChinaUtility-Based Energy Efficiency Finance Program (CHUEE/Program)

This program is for IFC to provide up to US$50 million in Risk Sharing Facilities ("RSF") for participating commercial banks in China to support the development of a portfolio of up to US$115 million in energy efficiency project loans. The Program is expected to have a significant developmental impact on promoting energy efficiency, reducing pollution and greenhouse gas emissions, as well as promoting SME lending in China. The Program is also supported by a grant of US$16.5 million from GEF and US$3.0 million from the Finland's Ministry of Trade and Industry.

The Program seeks to:

(i) support the Government's strategic priorities for energy efficiency (EE) and environmental protection as set forth by the National Development and Reform Commission (NDRC) in its Eleventh Five Year Plan and the PRC Energy Conservation Law;

(ii) operate on a commercial basis;

(iii) increase the use of EE equipment through provision of technical assistance and a risk-sharing facility;

(iv) be implemented in partnership with utilities, banks and EE equipment suppliers;

(v) respond to existing EE marketing and finance barriers; and

(vi) support the Government's priorities for accelerating the use of natural gas.

The Program brings together, for the first time, three parties--utility companies, suppliers of EE equipment, and commercial banks ¨C to create a new financing model for the promotion of energy efficiency. Overall, IFC's program will support over $150 million energy efficiency projects and equipment investment, which in turn are expected to achieve greenhouse gas reductions of about 5 to 10 million tons.

Financial Markets

Panda Bond

In October 2005, IFC launched a local currency RMB bond (the "Panda Bond") in the Chinese domestic market. The RMB1.13 billion 10-year bond was placed with institutional investors in the national interbank market. IFC used proceeds from the bond to finance Guangzhou Development Industry holdings, Anhui Conch Cement Company and Beijing United Family Hospitals.

This IFC issue marks the opening of the Chinese RMB bond market to international financial institutions. This transaction provided a model for future high-grade issuers and helped deepen the overall capital markets. IFC's RMB bond issue represents an important step for China's capital markets and is expected to facilitate further expansion of the non-government bond markets in China and increase access to capital for private companies. The bond provides IFC with a unique opportunity to support high quality domestic companies that need local currency financing.

United Rural Cooperative Bank (URCB)

In 2006, IFC acquired 5% shares in the United Rural Cooperative Bank (URCB). This marks the first foreign equity participation in a Chinese rural cooperative bank. This pioneering project will serve as a valuable precedent for the process of restructuring and reforming China's rural credit cooperatives.

IFC utilized its extensive experience in investing in Chinese financial institutions to help structure this pioneering transaction. IFC's technical assistance funding will also support rural cooperative sector reform at the provincial level. IFC will place on URCB's Board of Directors a senior banker who has extensive Chinese and international banking experience and will provide ongoing guidance to URCB's management as it develops into a modern and sophisticated financial institution.

Reforming the rural credit cooperative system has a profound impact on rural development and poverty alleviation in China. This project aims to set a benchmark for rural cooperative banks in China. IFC is committed to helping URCB strive for high standards in corporate governance, disclosure and environmental and social responsibility so that this institution can lend strong support to China's rural financial sector reform.

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