China Daily Global Edition (USA)
PRIVATE & CONFIDENT
Regulator’s liberalization, innovation by non-State banks are making financial services inclusive
Ten years ago, Peng Jindong, then 21, set up a small e-store called Mmaicco to sell street-dance wear on Taobao, China’s largest online marketplace operated by Alibaba GroupHolding Ltd.
Peng was based in Zhengzhou, Henan province, then. Little did he realize that financial innovation, brought about by the liberalization of financial services and the advent of new Chinese private sector banks in offline and online channels, would help him to expand his business to men’s and women’s clothing.
Peng’s business expansion in subsequent years was a result of online shopping giant Alibaba’s 2010 decision to offer easy loans to merchants on Taobao.
As one of the first group of traders who received loans, he borrowed 5,000 yuan ($719) with sales orders for collateral.
Later, he relocated to Hangzhou, Zhejiang province, rented a 140-squaremeter apartment and hired a few hands to run the business. Again, it was Alibaba’s loan that made it possible. This time round, the loan was much bigger: 100,000 yuan.
And when Ant Financial, an Alibaba subsidiary, launched an online private bank called MYbank in 2015, Peng received a credit quota of 1 million yuan from it. Based on his previous record, he did not have to pledge anything or offer any collateral to MYbank.
That emboldened him to become ambitious. He wanted to launch his own clothing brand, outgrowing the sales-only phase of his business. So he spoke to a loan officer of MYbank about a possible bigger loan.
MYbank assessed risks using big data analysis and decided to increase his credit limit to 2 million yuan. That helped Peng to contract a small clothing factory, hire five fashion designers and more than 10 employees. He also rented a 1,000-square-meter office and a warehouse of the same size inHangzhou.
“Our company is still very small. But just like Jack Ma, the founder of Alibaba, I also want to run a business for 102 years,” he said.
He could have added: “And do a lot of things”.
For, he owns a clothing brand already and will open an offline store next.
Peng’s success is as much a tribute to his can-do spirit as it is a shining example of MYbank’s Wenzhou Minshang Bank Co Ltd effectiveness in China’s liberalized banking industry.
As an online bank (with no offline branches), it relies on internet technologies like big data and cloud computing to make lending decisions, and assess and manage risks.
It has positioned itself as a specialist in all things small— that is, its deposits, loans and customers (mainly self-owned businesses, farmers and startups founded by college students in rural areas) are all small.
By November-end, MYbank had served more than 2 million micro and small enterprises, lending each 15,000 yuan on average. Its loan balance was 25.4 billion yuan, up 243 percent from the beginning of last year.
Starting from June 2016, it also offered micro and small business owners a free online product that analyzes financial data of their business thoroughly.
This means, they no longer have to make rough calculations of their profits or losses. Currently, 500,000 micro and small enterprises are benefitting from the product.
That’s a contrast to the past. This change in China’s financial services sector began with the launch of a trial program in 2014 to set up the first five private banks, including MYbank.
The China Banking Regulatory Commission has gradually accelerated approvals for the establishment of such banks. As of Jan 10, the CBRC has approved 17 private banks. Seven of them have opened for business already.
Among the new kids on the banking block are Beijing’s Zhongguancun Bank, named after the area where it is located, also known as China’s “Silicon Valley”; and Jiangsu Suning Bank Co Ltd, jointly founded by electronics retailer Suning Commerce Group Co Ltd and a few other companies, in Jiangsu province.
At anews conferenceonDec 8, Ling Gan, director of the CBRC’s City Commercial Banks Supervision Department, said the regulator will continue to push forward the orderly establishment of private banks, as long as the applications for banking licenses meet regulatory