Citigroup Inc., the world's biggest financial services company,
is keen to attract more of China's small and medium-sized
enterprises (SMEs) as clients. They indicated this at an expo
earlier this month in Guangzhou, Guangdong Province.
It's the first time that the US financial giant has participated
in the Third Small and Medium Enterprises Fair, which is
co-sponsored by government bodies including the nation's top
banking regulator, the leading planning agency and the Ministry of
Finance.
Richard Stanley, chief executive officer of Citigroup China
operations, said the financial giant would give assistance to SMEs
which were regarded as the new engine of economic growth.
Citigroup defines SMEs as companies with annual revenue of
between 10 million yuan (US$1.26 million) and 1 billion yuan
(US$126.2 million). Each bank normally has its own method of
defining what an SME is. ?
Citigroup is not the only foreign player gearing up to tap into
the financial needs of SMEs. Standard Chartered Bank and the
Hongkong and Shanghai Banking Corp (HSBC) have also started
offering services to SMEs. Standard Chartered was the first
overseas lender in Shanghai to offer non-mortgage type loans to
such businesses. ?
Qualified small companies can borrow between 100,000 yuan
(US$12,624)?and 500,000 yuan?(US$63,123) from the bank's
outlets in Shanghai and Shenzhen without any collateral. Loans to
these firms are a key product in the consuming banking sector, said
Christine Ip, Country Head of Standard Chartered (China) consumer
banking.
Loans granted to China's SMEs topped 2.64 trillion yuan in the
first half of this year, the country's banking regulator said
earlier this month. The outstanding value of loans to smaller
businesses increased 141.2 billion yuan (US$17.83
billion)?from the start of the year, the China Banking
Regulatory Commission (CBRC) said on September 15.
Approximately 778,600 SMEs have been granted credit from
banks--up 15,900 from the start of the year. The bad loan ratio of
SMEs dropped 1.87 percentage points at the end of the first half,
the banking regulator said, without giving a current
figure.?
London-based Standard Chartered also initiated a program called
Legend of the Future - China's Leading Enterprises of Tomorrow.
It's an award recognition program to trigger more support for SMEs
and create an improved environment for the sector's expansion.
Presently Standard Chartered offers loans to SMEs in 10 cities
including Shanghai, Beijing, Shenzhen and Guangzhou. It has a team
of over 100 client managers which could grow to 200 in the near
future.
HSBC employs more than 2,500 people in China including about 485
for its commercial banking services which includes its team for
SMEs. That marks a 70 percent increase over three years.
Overseas banks' efforts to woo more SMEs were in line with
China's banking regulator's policy to grant small firms more
lending options and help 'jump-start' them.
Overseas experience has shown that with the development of the
capital market, big firms and group clients turn to stock markets
for financing. This leaves small firms to the banks as a new cash
cow, Wang Zhaoxing, assistant to the chairman of the banking
regulator, said during the Guangzhou Expo.
Authorities have already made plans to push banks to offer more
financing channels to small enterprises to diversify risk triggered
by focusing lending on big companies.
Liu Mingkang, chairman of the CBRC, said late last year that
Chinese lenders must improve loan structures and avoid risks by
focusing too heavily on big companies. The SMEs campaign was also
implemented by the local banking regulator.
The Shanghai Bureau of the CBRC picked Standard Chartered and
the Business Development Bank as two key overseas players in
Shanghai's bid to develop SME loans. The two lenders have been
authorized to set up credit management systems for such businesses.
?
Wang said: "Small and medium-sized firms are contributing more
to the country's economy. Granting loans to these small entities is
a main avenue to solve their financing problems."
Though the number of SMEs is growing rapidly, it's in some cases
difficult for them to acquire bank loans as their credit worthiness
is routinely questioned. That pushed some small companies to the
black market for financing. However, the situation is improving as
more banks step up efforts to cater to smaller firms.
(Shanghai Daily September 25, 2006)