HONG KONG: China Development Bank (CDB), a commercial bank that funds government infrastructure projects, opened its first overseas branch in Hong Kong yesterday, and plans to launch other overseas offices in the next five to ten years.

CDB, the fifth-largest commercial bank of the country by total assets, will open offices in Cairo and Moscow by the end of this year, and in Brazil and Venezuela next year, Vice President Li Jiping said at the opening ceremony of the bank's Hong Kong branch yesterday.

"For CDB to step forward, it is necessary to set up a branch in Hong Kong," Li said, "We will bring more high-quality mainland enterprises and assets to Hong Kong, which will facilitate renminbi-based business in the city."

Li added that the bank's strategic goal is to become an international financial institution, with the new Hong Kong branch acting as a platform for mainland companies to access the international market.

Asked if CDB has any acquisition plans, Li said the bank has no plans to acquire other commercial banks, but will study the possibility of acquisitions if the central government grants approval to run a retail banking business.

CDB opened its office in Hong Kong, now its first branch in the city, in 1999.

Chairman of the board Chen Yuan said yesterday the bank provided $4.5 billion loans in Hong Kong by the end of 2008. The capital has been allocated to support 24 infrastructure projects in Hong Kong, including the MTRC, the Ocean Park and the West Kowloon tunnel.

He added that the bank has also promised to fund 15 other projects in the city, with a total amount of $2 billion.

"Our foreign-currency loans also climbed to $79.1 billion by the end of June, which is the top among mainland lenders," Chen said.

CDB announced in July it plans to issue 3 billion-yuan worth of bonds in Hong Kong, but some analysts said the tighter regulations on the sale of investment products in the city may hinder the growth of the bond market.

However, Liang Huijiang, deputy head of the bank's treasury bureau, expressed confidence about the sale of renminbi bonds in Hong Kong.

"Investors may need some time to adapt to the new regulations," Liang said, "(but) market reaction on the bond subscription has been quite enthusiastic so far."

Banks in Hong Kong have given conflicting ratings to CDB's yuan bonds. Standard Chartered and CITIC Ka Wah Bank have rated the bank's renminbi bonds as "high risk", in contrast to HSBC and Bank of China, which rated them as "low risk".

Daniel Chan, a senior investment strategist at DBS Bank (Hong Kong), said the yuan bond is a fixed-rate investment product, whose risk should be lower than that of a hedge fund or stock.

"If the yuan bonds are high risk, then the rating for hedge funds and stocks should be extremely high risk," he said.

(HK Edition 07/30/2009 page4)