As reported by Bloomberg News, the highest funding costs since 2008 may make it more expensive for China’s state banks to lend to commodity producing nations, as the world’s fastest-growing major economy tries to secure natural resources to fuel growth.
Five-year borrowing costs for the so-called policy banks surged 70 basis points to 4.6 percent this year and touched a three-year high of 4.68 percent on Aug. 4, China bond prices show. Top-rated Indian lenders pay 9.45 percent on their five- year debt, compared with 8.94 percent at the end of 2010, data compiled by Bloomberg show.
The government relies on China Development Bank Corp. and Export-Import Bank of China to lend to resource-rich nations such as Brazil, Kazakhstan and Venezuela in exchange for commodity and energy supplies. Borrowing costs surged after the central bank raisedinterest rates to control inflation and lenders increased provisions against loans for local governments. The value of banks’ dollar loans are falling as the yuan strengthened 3.3 percent against the currency in 2011.