Category: Banking & Financial Services


Permalink 02:21:53 pm, by dacare, 264 words, 72 views   English (US)
Categories: Banking & Financial Services

ZTE banks on patents to expand

ZTE Corp, a leading Chinese telecom equipment and smartphone manufacturer, aims to increase its presence in international markets and establish itself as a multinational firm through boosting the number of its patents.

"We've made the development of intellectual property rights our company's core strategy, especially when expanding to overseas markets," said Guo Xiaoming, vice-president of the company, which is based in Shenzhen, Guangdong province.

Guo said that if a company doesn't have a solid foundation in intellectual property rights, it will be very difficult to establish itself in overseas markets, especially in matured markets such as the United States and Europe.

"We've been putting the development of intellectual property rights on top of our company's agenda. We've also been investing heavily in research and development," he told a media briefing on Monday.

Guo said ZTE invests about 10 percent of its annual sales on research and development every year. It has injected more than 40 billion yuan ($6.42 billion) on R&D over the past five years.

According to a report from the World Intellectual Property Organization in March, ZTE filed 2,309 Patent and Cooperation Treaty applications in 2013, becoming the world's second largest patent filer.

Panasonic Corp of Japan – with 2,881 published applications — was the top applicant last year. ZTE was the top applicant in 2011 and 2012, while Panasonic headed the applicants' list in 2009 and 2010.

Rather than the quantity of patents, Guo said ZTE eyes their quality.

"The cost of filing a patent in Western countries is quite high — usually 50,000 to 80,000 yuan for each application. We only file those inventions that have the biggest potential in monetization," he said.

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Permalink 02:05:50 pm, by dacare, 584 words, 126 views   English (US)
Categories: News of China, Banking & Financial Services

Privately funded banks to be launched

Ten private companies will launch five banks that are entirely funded by private capital in Tianjin, Shanghai, Guangdong Province and Zhejiang Province as part of a pilot program, Shang Fulin, head of the China Banking Regulatory Commission, said Tuesday.

The establishment of the private banks, which was approved by the central government in January, is considered a vital step in the country's financial reform and its opening-up of the banking sector to private capital.

Internet giants Tencent Holdings and Alibaba Group will be among the 10 companies approved to participate in the pilot program, Shang said, adding that the five private banks should have differentiated market positioning.

Shang did not provide details about the names of the five banks, or the amount invested in them.

The website of People's Daily quoted Shang as saying on Monday that the 10 companies will also include Fosun International, a real estate conglomerate, and Chint Electrics Co, an electrical equipment maker.

Each bank must have two private investors, Shang said, and they will be allowed to open for business when they have made sufficient preparations.

The private bank that Tencent plans to initiate will specialize in providing products for the burgeoning online finance sector, a staff member of Tencent told the Global Times Tuesday on condition of anonymity.

"Tencent will utilize its advantages in the Internet service industry, and [launch] online financial products based on the services provided by the traditional banking sector," the source said.

The staff member said the bank will be located in Qianhai, a district of Shenzhen in South China's Guangdong Province. Qianhai was approved by the State Council in 2010 as a test ground for the free cross-border flow of the yuan and financial innovations.

A staff member of Alibaba, which is a partner in Yu'ebao, one of the country's most popular online money market funds, told the Global Times Tuesday that Alibaba is working with China Wanxiang Holdings Co to apply for a private bank license.

"Now our application materials are still being reviewed," said the staff member, who wished to remain anonymous.

Wanxiang Holdings is part of China's biggest auto parts company Wanxiang Group, which is based in Hangzhou, East China's Zhejiang Province.

The Alibaba source declined to comment on the location or market positioning of the bank.

Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology, told the Global Times Tuesday that the private banks will offer loans of up to 1 million yuan ($162,879) that will mature in less than two years.

The banks' major customers will be those that have difficulty in getting loans from large commercial banks, Dong said, such as small and micro-sized businesses. That is why the new program will not have a disruptive impact on the banking sector or influence the interest rate, he said.

According to Shang, the private banks will be regulated in the same way as large commercial banks, but their performance will be more market-based.

Milestones in opening up to private investment

May 23, 2012 The State Council required sectors including railways, telecoms and banking to draw up detailed rules for encouraging private investment.

May 26, 2012 The China Banking Regulatory Commission (CBRC) said it would encourage greater private investment in the banking sector, without imposing restrictive or other additional conditions.

Jun 19, 2013 The State Council said China should set up private banks and financial lease companies that bear the burden of risk on their own.

Mar 11, 2014 CBRC chief Shang Fulin said China will set up five private banks on a trial basis.

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Permalink 01:54:00 pm, by dacare, 850 words, 178 views   English (US)
Categories: News of China, Banking & Financial Services

Private banks to be on the rise

Since China Minsheng Bank Corp became the first private bank in 1996, the government has not approved any others, although it has allowed a small amount of private capital to be invested in commercial banks. This will soon change as the government opens up the financial sector to private enterprises.

China now has five State-owned commercial banks, three policy banks, 12 joint-stock banks, 144 city commercial banks, 47 foreign capital banks and numerous banks in towns and rural areas. The introduction of private banks will introduce more competition to the industry to the benefit of private businesses strapped for capital.

Until now, the names of more than 40 private bank applicants have gained pre-approval from the State Administration for Industry and Commerce. However, the success of Minsheng, which was founded at a time when loans for small and medium-sized enterprises were relatively undeveloped, is unlikely to be repeated today given the many financial products fighting for customers' attention. Some private banks are bound to fail if they do not have a sound risk-control system.

With the opening up of the banking industry to private capital after 14 years of hiatus. The biggest change in the policy is that private enterprises have seen their status elevated from "equity participator" to "initiator", according to the guidelines issued by the State Council in July that encourages more private capital to enter the financial industry.

Private banks that are filing for approval fall into two categories. First, there are enterprises or business associations that seek easier financing channels for the industry. For instance, Suning Commerce Group Co Ltd, a leading home appliance retailer, was the first listed company to announce its plans to apply for permission to launch a private bank. Other public corporations have also formed groups to create their own private banks.

The second category is more ambitious. This sector is the Internet companies that want to build a line of services on their own financial platforms, such as Tencent Technology (Shenzhen) Co Ltd.

Companies aiming to get a pieces of the pie in private banking cover a wide range of industries including e-commerce, real estate, food, garments, electrical equipment, technology and aviation.

Why does private banking look so enticing?

The Chinese banking industry has been enjoying lucrative profitability. According to the half-year profit statements of 2,467 A-share companies in 2013, the total net profits of the 16 listed banks amounted to 619.1 billion yuan ($102.1 billion). up 13.54 percent from the same period last year, accounting for 54.3 percent of total A-share profits. Although profit margins in banks have been decreasing in recent years, the large net profits still have a great appeal to private businesses.

Private banks can ease the difficulties in financing and acquiring loans by private enterprises. According to a study conducted by Qianzhan Industry Research, a Beijing-based research group, a mere 1.3 percent of small and medium-sized enterprises could conduct direct financing. Others accumulate capital through bank loans and private capitalization. However, because of their relatively low credibility, high management costs and banks' preferences for large-scale companies, only 10 percent of SMEs have access to bank credit. It is predicted that SMEs will need 17.5 trillion yuan in capitalization in 2014.

Possible bankruptcy

Severe competition in the banking sector stands in contrast with the private sector's enthusiasm. The profits in the banking industry are highly concentrated. Among the 16 listed banks, the profits of the top five State-owned banks made up 75.5 percent of the total profits in 2012. The total assets of city commercial banks accounted for a mere 9.4 percent of the total assets held by banking financial institutions.

Experts have been applauding the opening up of the banking sector to private capital. However, there are bound to be risks ahead.

Jin Liqun, chairman of the sovereign wealth fund, China Investment Corp, said some of the private banks are bound to go bankrupt.

State-owned banks are not going to go bust because customers are assured their deposits will be safely managed because the central Party and the government will not cheat their own people, said Jin. Private banks, on the other hand, face the risk of bankruptcy. But people don't have to be overly concerned because development comes with risks, he added.

"Deposit insurance needs to be put in place to protect customers' interests in case of bankruptcy," said Jin. "I heard of opposition from large banks that claim the insurance system is nothing but a burden because they are not going to go bankrupt. However, these banks have been given government protection to be exempt from bankruptcy, which attracts customers to put their money into their accounts. What is the cost of establishing an insurance system compared with their vested interests?"

Experts also warn that the current enthusiasm may not pay off.

"Private companies should remain cool-headed before they enter the industry," said Ba Shusong, deputy director-general of the Financial Research Institute of the State Council Development Research Center. He cited a case in Taiwan in which 16 private banks gained approval in 1992, but where only six remain.

Generally speaking, banks see no profits within the first three years after their establishment. Companies should wait until the industry has undergone consolidation before they try their luck.

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Permalink 12:38:20 pm, by dacare, 110 words, 140 views   English (US)
Categories: News of China, Banking & Financial Services

BEA and DBS open FTZ outlets

Bank of East Asia and DBS Bank were the first among overseas lenders that officially opened their sub-branches in the Shanghai free trade zone yesterday, as they were attracted by potential opportunities in China's latest financial reform test bed.

In addition, at least six foreign banks have received the nod from the China Banking Regulatory Commission to prepare for a new outlet in the FTZ. They include Citi, HSBC, Hang Seng Bank, Deutsche Bank, United Overseas Bank and ANZ. The FTZ will allow overseas banks to introduce new services and expand more rapidly in the country, said Geoffrey Choi, assurance leader of financial services at Ernst & Young for China.

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Permalink 09:44:13 am, by dacare, 148 words, 92 views   English (US)
Categories: News of China, Banking & Financial Services

Pudong Development Bank earns $6.7b in 2013

Shanghai Pudong Development Bank's net profit jumped 19.8 percent year on year to nearly 41 billion yuan ($6.7 billion) in 2013, according to a filing to the Shanghai Stock Exchange late Friday.

The financial institution is the first listed commercial bank in China to disclose its 2013 results, Shanghai Securities News reported on Saturday.

Earnings per share stood at 2.195 yuan, up 19.8 percent from a year ago, according to the statement. Operating revenue stood at just over 100 billion yuan, up 20.61 percent year on year.

The lender's total assets reached 3.68 trillion yuan, up 17 percent from a year earlier. Its total liabilities stood at 3.47 trillion yuan, up 17.1 percent from a year ago.

The lender's non-performing loans ratio was at 0.74 percent, 0.16 percentage points higher than that at the end of 2012.

Its outstanding deposits totaled 2.42 trillion yuan by the end of 2013, up 13.41 percent from a year earlier. Outstanding loans reached 1.77 trillion yuan, up 14.37 percent from the end of 2012.

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Permalink 09:36:24 am, by dacare, 551 words, 120 views   English (US)
Categories: News of China, Banking & Financial Services

Bankers concerned over credit risks of SMEs

Chinese bankers are concerned about credit risks connected to enterprises that are affected by the nationwide campaigns to eliminate outdated industrial capacity and curb local government financing vehicles, said a report released on Monday.

The report, based on a survey by the Chinese Banking Association and Pricewaterhouse Coopers, which polled 1,604 bankers across 31 provinces and municipalities, said 54.5 percent of the surveyed bankers said they believe adjusting the nation's industrial structures may increase credit risks to China's banking system.

Also, 31.6 percent said they believe that nonperforming loan risks are most likely to involve micro-sized and small enterprise loans. Among the bankers, 61.3 percent said the Yangtze River Delta is most likely to face the pressure of increasing NPLS, since the region is host to micro-sized and small company enterprise hubs, which face systemic risks.

Market insiders said loans to micro-sized and small enterprises have been increasingly disputed in the banking industry. While some lenders think such loans may offer new growth opportunities, others have shunned applications for such loans.

"Leaders of banks are torn over the risks of loans" to smaller companies, said a source with a Shanghai-based, State-owned bank.

On the one hand, governments at various levels encourage support from the financial sector to small enterprises to help them grow, and such loans may indeed help them out during hard times.

On the other hand, it is quite risky to make loans under current conditions. In many cases, the applicants do not have guarantees, and they are seeking unsecured loans, said the source, who declined to be identified due to the sensitivity of the matter.

NPLs have been rising in recent months, and they climbed by the largest amount in the third quarter, according to data from the China Banking Regulatory Commission.

Bad bank loans outstanding increased by 24.1 billion yuan ($3.96 billion) to 563 billion yuan at the end of September. But due to swift overall loan growth in the third quarter, Chinese banks' NPL ratios ticked up only slightly.

The system-wide NPL ratio reached 0.97 percent, compared with 0.96 percent at the end of June, the commission said.

About 43 percent of polled bankers said they have been closely watching the risks exposed to debts of local government financing vehicles.

On Dec 10, the central government announced that the performance evaluation of local government officials will no longer be based primarily on economic growth, but rather on sound financial management.

"The change is credit-positive for local governments as well as the central government, because reduced incentives to promote economic growth at all costs will instill fiscal discipline and curb the rapid rise in contingent, quasi-government debt," said Debra Roane, vice-president and senior credit officer of the sub-sovereign group at Moody's Investors Service in a note.

The new evaluation criteria should lead to greater discipline in borrowing. Local officials will be held accountable for their investment and borrowing decisions, including those related to LGFVs, and their handling of these decisions will be a key factor in promotions, said Roane.

The National Audit Office's initial survey of government debt revealed that LGFV debt alone amounted to 10.7 trillion yuan at the end of 2010, or 27 percent of GDP, of which 6.7 trillion yuan was classified as direct debt of local governments.

Moreover, estimates by the International Monetary Fund show a much greater increase and level of debt operationally outside the general government budget.

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