Banks to balance social responsibility with risk prevention

Chinese financial institutions have vowed to strengthen financial support for poverty-stricken areas while mitigating against debt default risks, as an important element of the country’s antipoverty battle.

“Financial institutions need to better balance the relationship between fulfilling social responsibility and preventing financial risks,” said Liu Guoqiang, the central bank’s vice-governor, at a meeting held in Jinping county in Guizhou province last week.

He called for higher attention to be paid to potential risks in anti-poverty programs, while continuing to earmark financial resources for poverty alleviation-related investment.

Measures will include utilizing the agricultural credit guarantee mechanism to diversify risks; encouraging local governments to effectively integrate fiscal capital and increasing subsidies on interest payments on loans related to poverty alleviation; and establishing risk compensation and guarantee funds.

“(The measures) should remove financial institutions’ concerns about loan quality, and promote the proactive issuing of loans,” Liu said.

Leaders from 22 financial institutions — including regulatory bodies, policy and commercial banks, and insurance and asset management companies — gathered at the meeting in Jinping, sharing their achievements in supporting 64 poverty-stricken counties to improve the local people’s quality of life, especially in terms of education and healthcare.

The equity market could also play an important role in channeling more capital into the real economy and supporting less-developed regions, said Zhao Zhengping, vice-chairman of the China Securities Regulatory Commission.

In September 2017, the CSRC issued guidelines to encourage the capital market to better support the national anti-poverty program. Since then, 12 companies from poverty-stricken areas have successfully Liu Guoqiang, issued A shares on mainland stock markets through a special mechanism called the Green Channel. Together they have raised a total of 6.9 billion yuan ($997 million) from the capital market.

Another 66 companies are preparing IPOs, while 98 companies have already listed on the National Equities Exchange and Quotations, known as the New Third Board, according to CSRC data.

During the past five years, financial institutions have invested nearly 33.1 billion yuan — in the form of bank loans, funds and risk security funds — into nationwide antipoverty programs, helping more than 720,000 people, the central bank vice-governor said.

China aims to lift all of its citizens out of poverty by 2020. As of the end of 2017, the country had 30 million poor residents, compared with 98.99 million in 2012, according to the National Bureau of Statistics.

Although some of those 30 million people have risen out of extreme poverty, many still struggle to meet their basic daily needs.

In addition to expanding financing channels, many State-owned financial institutions have also transferred managers to local governments, where they have become officials in counties and towns in less-developed regions.

Financial institutions are also introducing new technologies, including e-commerce and fintech, in rural areas to support industrial and business development based on innovative models, according to the speeches delivered at the meeting in Jinping.

“Digitalization is already a key driver and enabler of transformation for companies operating in the Chinese market, and we expect this to become another significant dimension of efforts to enhance connectivity within and among countries and regions related to the BRI,” said Barber.

Eager to enhance their earning ability, many countries related to the initiative, such as Russia, Poland, Egypt, Malaysia, Indonesia and Nigeria, plan to attract more investors from China in the service outsourcing industry, especially the digital economy, to boost goods trade and other commercial activities, as well as their job market, according to information showed on the Ministry of Commerce website.

Spotting the growing importance of China’s outbound direct investment, KPMG formed the Global China Practice in 2010. Today, it has teams in more than 60 locations around the world, including countries and regions involved in the BRI.

Barber said that supporting Chinese and global firms to develop businesses in markets related to the initiative will continue to be a priority for KPMG.

China’s outbound direct investment in economies involved in the BRI rose 12 percent year-on-year to $9.6 billion between January and August this year, according to data from the Beijing-based China Council for the Promotion of International Trade. These countries accounted for 12 percent of China’s ODI in 2017.

Backed by its population size, growing consumption power and fast urbanization pace, the BRI has the potential of having a lasting positive impact on global growth, said Li Guanghui, vice-president of the Chinese Academy of International Trade and Economic Cooperation.

(The measures) should remove financial institutions’ concerns about loan quality ...” vice-governor the central bank’s