HSBC targets China tech start-ups with 2bn yuan loan scheme offering lower rates, fee waivers

PUBLISHED : Wednesday, 14 December, 2016, 5:59pm
UPDATED : Wednesday, 14 December, 2016, 8:17pm

HSBC has launched a 2 billion yuan (US$290 million) lending scheme for what it calls “innovative” companies in China, a sign that traditional lenders eye the country’s burgeoning technology start-ups.

The programme, targeting tech start ups and other firms taking innovative initiatives in southern Guangdong province, is the latest effort by the long-established but struggling lender to capitalise on China’s entrepreneurial industry for growth.

Guangdong is home to China’s version of Silicon Valley – the city of Shenzhen – where companies such as Tencent, Huawei and drone maker DJI emerged and grew into world-leading technology behemoths. There are also hundreds of smaller players experiencing rapid growth but thirsty for cash to fuel their momentum.

Rather than turning to traditional financiers such as HSBC or Bank of China, a majority of Chinese start-ups opt to raise funds from venture capitalists and private equity firms, before some of them take a step further to list their shares in Shenzhen or via a Nasdaq public offering.

The Pearl River Delta is turning into the ‘Silicon Delta’ for China, boasting a concentration of innovative enterprises
Montgomery Ho, HSBC Guangdong

HSBC said the new loan facility would offer “preferential interest rates” and service fee waivers to participants, allowing them also to connect with industry leaders through forums and other events.

“The launch of this scheme will help us forge partnerships with the innovators who are driving the transformation of Guangdong’s economy,” said Montgomery Ho, HSBC’s chief executive for Guangdong.

“The Pearl River Delta is turning into the ‘Silicon Delta’ for China, boasting a concentration of innovative enterprises in sectors like communications equipment, information technology and biotechnology,”he said.

Many mainland Chinese banks are reluctant to extend credit lines to start-ups on risk control concerns, given that a considerable number of them would eventually fail.

Hit hard by global economic headwinds, HSBC has been struggling to improve profitability, with a slew of layoffs and exits from a number of countries across the world since 2011.

However, it managed to regain some lost ground from rivals in Asia-Pacific, recording a 10 per cent rise in adjusted pretax profit in Asia for the thrid quarter of the year.