Banking Across Borders: Are Chinese Banks Different?

IMF Working Papers, November 13, 2020

Source details

Authors: Eugenio M Cerutti, Catherine Koch, Swapan-Kumar Pradhan
Publication date: November 13, 2020
Central question: How does the global footprint and cross-border lending behavior of Chinese banks compare with that of other bank nationalities?

Chinese banks have become the largest cross-border creditors for almost half of all emerging market and developing economies (EMDEs).
The global reach of Chinese banks resembles that of banks from advanced economies (AEs).
International banks, and Chinese banks in particular, grant a substantial share of their cross-border loans from affiliates located abroad; this motivates the study’s nationality approach.
Using a gravity model with a novel measure of distance that captures the role of foreign affiliates across all bank nationalities:
- Larger distances deter cross-border bank lending to EMDEs more than to AEs.
- For Chinese banks, distance deters lending to EMDEs less than for peer EMDE banks.
Correlates of bilateral lending:
- For all banks combined, bilateral economic interactions—trade, FDI and portfolio investment—positively correlate with lending.
- Chinese banks’ lending to EMDEs strongly correlates with trade.
- Chinese banks’ lending to EMDEs does not correlate with FDI.
- Unlike other banks, Chinese banks’ lending correlates negatively with portfolio investment.

Empirical approach: gravity model.
Novelty: a new measure of distance designed to capture the role of foreign affiliates across bank nationalities (used to assess how distance affects cross-border bank lending).

Subject areas: Balance of payments, Bank credit, Cross-border banking, Financial institutions, Financial services, Foreign banks, Foreign direct investment, Money, Portfolio investment
Keywords: Bank credit; bank lending; borrower country; Chinese bank; Chinese banks; Cross-border banking; cross-border lending; EMDE borrower; FDI; Foreign banks; Foreign direct investment; Global; Gravity model; lending bank; parent country; portfolio investment; Portfolio investment; Trade; U.S. dollar; WP

Series: Working Paper No. 2020/249
Issue: 249
Volume: 2020
Pages: 47
DOI: https://doi.org/10.5089/9781513561226.001
Stock No: WPIEA2020249
ISBN: 9781513561226
ISSN: 1018-5941
Preview citation (format: Chicago) on page: Eugenio M Cerutti, Catherine Koch, and Swapan-Kumar Pradhan. "Banking Across Borders: Are Chinese Banks Different?", IMF Working Papers 2020, 249 (2020), accessed 9/9/2026, https://doi.org/10.5089/9781513561226.001

IMF Working Paper No. 2020/249 (November 13, 2020) — summary based on the page “Banking Across Borders: Are Chinese Banks Different?”