Money to burn? Mainland China firms seek new investors
SHANTOU, Guangdong: The Guangdong Yixiang Folk Culture Co. has a licence to print money — thousands of look- alike US dollars roll off its clattering presses every minute, intended as burnt offerings for the heavenly bank accounts of Chinese ancestors.
But in the earthly realm, small- and medium- sized companies like this have a devil of a time getting a loan from China’s big state- owned banks, which prefer to lend to large, often state- owned, firms.
Business is booming, says general manager Xu Shaohong, and it is ready to expand its products from “Bank of Hell” currency to paraphernalia for events earlier in the cycle of life, such as weddings and births.
Like thousands of other capital-starved enterprises in the upside- down world of Chinese corporate finance, it has applied to list on the National Equities Exchange and Quotations ( NEEQ), a little-known stock market based in Beijing.
The NEEQ, also known as the “New Third Board,” has exploded, growing from 356 companies at the end of 2013 to more than 6,000 today — with nearly 1,000 joining since Jan 1.
It already has twice as many listings as the Shanghai and Shenzhen stock exchanges combined and is expected to add as many as 5,000 more by the end of 2016.
“It’s the next NASDAQ,” Xu said, referring to the US exchange favoured by technology startups.
As the world’s second-largest economy falters, Beijing is counting on small, private companies to help move it away from dependency on heavy industry and plodding stateowned enterprises.
Guangdong Yixiang is a prime example. Its offices in the southern city of Shantou are bright and modern. It has almost 80 employees and mostly exports to Hong Kong and diaspora Chinese communities across Asia.
Documents submitted to NEEQ as part of its listing application show three years of healthy profits — more than two million yuan ( US$ 300,000) in 2015.
With reliable income from one of life’s two certainties, it would seem to be an attractive borrower.
For years, China has promised to make it easier for such firms to access capital, and last year mainland executive chief Li Keqiang urged the country’s banks to increase financing for them.
But lenders remain risk-averse, said Suzie Wu, a managing partner at Tianxing Capital, which invests in NEEQ- quoted firms.
“They actually only support the big companies,” she said, leaving companies like Guangdong Yixiang to turn to “shadow banks,” unofficial lenders that often charge exorbitant, profitsapping interest rates.
“Until the NEEQ market came, it was very difficult for the small, medium enterprises to get financial support.” — AFP