Shanghai and Silicon Valley banks join up
Jane Cai in Beijing
California-based Silicon Valley Bank and Shanghai Pudong Development Bank plan to set up a joint-venture lender to serve small and medium technology companies on the mainland.
The US bank, a unit of SVB Financial Group, plans to invest up to 500 million yuan (HK$584 million) for a stake of up to 50 per cent in the joint venture. The move is pending approval of American and mainland regulators, according to stock exchange filings this week.
If approved, it would become the first bank specialised in serving technology companies on the mainland, which has been shifting focus from labour-intensive industries to innovative enterprises. The government has also started supporting small private firms that banks generally ignore.
'China needs specialised banks like SVB to support its hi-tech companies,' said Guo Tianyong, a professor at the Central University of Finance and Economics in Beijing. 'However, the regulators have been cautious in approving joint-venture banks involving foreign investment because of concerns of financial security.'
Ken Wilcox, chief executive of SVB Financial Group, said last month the lender was looking for a banking licence on the mainland so that it could pursue the 'enormous opportunities' in clean technology, mobile communications, cloud computing and e-commerce sectors.
Founded in 1983, the group had US$15.7 billion in total assets as of the end of September, serving 11,000 clients focused exclusively on technology, life sciences, venture capital and premium wine industries. Like other foreign investors with China ambition, the US bank has been working closely with the government in areas local lenders are incapable of or are unwilling to provide services.
The group set up the first consulting firm in Shanghai in 2005 and the second in Beijing this year to reach local enterprises and investors.
In 2008, it tested the water in the financial market by investing in Zhejiang Uni-Power Guaranty, a loan guarantee company. Last year it became a manager for a direct investment fund for the Shanghai Yangpu District government.
SVB supports promising start-ups by providing funding, networking and valuation services and helping them acquire venture capital. It then continues to serve client needs as they grow into mature companies.
The Shanghai Pudong Development Bank, the seventh-largest lender by assets, had 1.98 trillion yuan of assets as of the end of June. Net profits totalled 14.8 billion yuan in the first nine months of this year, up 44 per cent from a year earlier.