Investigating the Drivers of Chinese Bank Cross-border Syndicated Lending

Chinese commercial banks are increasingly using syndicated lending (SL) to develop cross-border business. In this study we examine the determinants of cross-border SL during the period 2006-2014 across 68 countries. The results show that expected credit risk is one of the main drivers of Chinese banks’ overseas syndication but that there are additional drivers, including government ownership, free riding, compensation for limited physical presence in borrower countries, the lowering of information asymmetries and diversification of the lending portfolio. We also find that Chinese banks prefer to group together in a syndicate rather than partner with a foreign-owned bank, and they demonstrate different motivations when extending SLs to developed and developing countries.