Gritty lady helps set standards for mainland's financial markets
with Anna Healy Fenton
How Fredy Bush started Xinhua Finance, helped set China's new market standards and launched an initial public offering - all within five years - is a remarkable story.
How she came to be in China in the first place is even more unusual, a tale of true grit and determination.
Raised a Mormon in Utah, she incurred the disapproval of the church by becoming a high school mother and marrying at 16. When she was just 19, her husband, aged 23, was killed in a motorcycle accident, leaving her as a first-year college student with two small children.
When a chance opportunity arose to work in Taipei assisting a Taiwanese government official procuring commodities, she jumped at it because it offered international schooling for her children, by then aged five and eight. It was 1985, she was 25 and had no idea what she was in for.
'I took it very naively. I didn't even realise Taiwan was under martial law then, but I was a single young mother with children to support,' she explains.
As a smoke-free, caffeine-free, alcohol-free young single American Mormon, Taipei was a rude awakening. 'I had my sleepless nights, what with losing my husband and feeling I didn't belong in Taiwan.' But every time she threatened to go home, her children encouraged her to persevere.
When martial law was lifted in 1987, she founded a consulting business building financial sector alliances between US and Asian companies. She continued to provide commodities data and was instrumental in setting up Taiwan's first official futures market.
Then, in November 1999, the far-sighted Ms Bush saw an opportunity in the mainland. As the country's financial markets started opening up, major international investors felt the need for reliable and unslanted financial information services, such as financial news, indices and ratings.
Ms Bush envisaged a vehicle supplying these financial tools. 'We wanted to build services based on internationally proven standards and localise them for China's markets. Xinhua Finance would be the trusted source for China.'
Persuading Xinhua, the state-run news agency, to accept her idea was easy. 'They knew China was moving in the direction of opening the market, and were concerned about how foreign investment would come in,' she explains. 'They knew big institutions would not come until they were comfortable with the risk, and that meant transparency.'
It was a case of being at the right place at the right time. 'Also, if you're doing something good for China, it's easy to get support.'
She had worked with Xinhua before, providing commodity quotes. Having been convinced of the need for products and services that encouraged transparency and disclosure, the agency signed a 20-plus-10-year exclusive agreement with a non-compete clause for Xinhua Finance.
She started the company in Hong Kong, she says, to ensure the right image, backed by international rule of law. Starting at the end of the Asian financial crisis with September 11 and Sars close behind was 'the perfect storm: the worst time ever to raise money for a China-related enterprise'.
But by the end of 2003, 'we began to see a shift in international attitudes to China, when the mainland really got more open'. She forged alliances with global players such as the FTSE Group, Lehman Brothers and PR Newswire. Demand grew steadily and by the end of last year the company was profitable, making a US$10.5 million net gain.
The mix of indices, ratings and news with investor relations proved right. Even better, there was no direct competition. 'We got in very early and no one does what we do. Some offer similar products but not the whole basket.'
As chief executive, Ms Bush continues to expand and secure Xinhau Finance's position. In November last year, she signed a 10-year co-operative agreement with China Development Research Foundation (CDRF), an arm of the policy think-tank, the Development Research Centre of the State Council. This means Xinhua Finance and CDRF work together to raise standards in corporate and financial markets, and educate mainland entrepreneurs on corporate governance and financial disclosure.
In April, Xinhua Finance linked up with leading think-tank the Milken Institute to launch eight economic indicators for the mainland financial markets.
Xinhua Finance's valuation rose from US$30 million in 2003 to US$800 million this year, driven by a 2004 listing on the Tokyo's Mothers Board, where its initial offering netted 3.5 billion yen ($242.44 million).
At the end of last year, a third of the company's investors were from overseas, with Japanese corporations and individuals accounting for 21 per cent. Xinhua News Agency's 35 per cent shareholding of three years ago has shrunk to just 3.5 per cent.
Total revenue for the year ending 2005 was US$110 million, an 84 per cent increase over 2004. Today, the firm has 1,000 staff, from 99 in 2001, with 18 offices and 21 news bureaus globally. It recently moved its headquarters to Shanghai.
Ms Bush believes the firm is well-positioned to take advantage of developments in the country's financial markets. She cites the growth potential of the corporate bond market, which is now less than 1 per cent of the country's gross domestic product, against the Asian country average of 15 per cent.
'We also find ourselves with a lot of content and I'd like to repackage that to get additional revenue,' she said, citing Money Journal, the firm's personal wealth advice magazine for high net worth individuals. 'And that's where our future will be built - continuing to set the standard for China's investment markets,' says Ms Bush.