LONDON (Reuters) - Barclays (BARC.L) has set up a commodities partnership with China Development Bank CHDB.UL, to establish a presence in China’s booming commodities and energy markets.
The 5-year alliance, announced on Wednesday, will initially focus on energy, metals and also carbon emissions, where Barclays is already a big player.
The agreement gives Barclays Capital, the investment bank arm of Barclays, scope to grow its commodity business in China, which is already the world’s biggest copper consumer and second biggest consumer of oil.
“We are already working on transactions. We have large transactions covering emissions, base metals and oil,” Benoit de Vitry, global head of commodities, emerging markets rates and quantitative analytics at Barclays Capital, told Reuters.
Barclays will provide products, trading expertise and training for China Development Bank, one of China’s largest government-owned entities which specialises in financing infrastructure developments.
Barclays will also help the bank develop risk management systems.
In exchange, China Development Bank will appoint Barclays as its preferred provider of commodity market risk hedging.
China Development Bank and Barclays already have a relationship as the bank and Singapore investor Temasek TEM.UL bought a stake in Barclays in July, which made China Development Bank one of Barclays’s largest shareholders, with just under a 3 percent holding.
De Vitry told Reuters, for the first three years of the alliance, the aim was to provide systems, training and products, so that by the end of five years it could be a standalone entity.
There is an option to extend the alliance if both parties agree.