Private Bank to be Launched in Wenzhou

private bank to be launched in wenzhou

The State Council has approved to establish five private banks funded by private capital as a pilot programme, revealed by Shang Fulin, chairman of the China Banking Regulatory Commission, at a news briefing of the ongoing NPC and CPPCC’s annual sessions in Beijing on March 1, 2014. Two Wenzhou-headquartered enterprises, CHINT and Huafeng together with Juneyao, a company founded by a Wenzhou merchant in Shanghai, are among the 10 companies selected by the central government for the pilot programme. The trial of setting up private banks totally sponsored by private capital in Tianjin, Shanghai, Zhejiang Province and Guangdong Province will make a significant breakthrough in China’s financial reform.

As told by Shang Fulin, the private banks in the trial will be funded by co-sponsors and the 10 private capitals taking part in the preparation process are all carefully examined and selected. Among them, CHINT, Huafeng and Juneyao have already set foot on the financial sector. You Xiaoping, chairman of Huafeng Group, a Wenzhou-based chemical materials manufacturer, said when attending China’s two sessions in Beijing as a NPC representative, “Huafeng Group will work with CHINT to participate in the preparation for the pilot programme so as to make private bank in Wenzhou a reality. In the future, Wenzhou’s private bank will aim at serving SMEs and we hope that it will play a catfish effect in China’s financial sector dominated by state-run banks.” Juneyao Group also confirmed on March 11 that they would cooperate with Fuxing Group to sponsor a private bank in Shanghai.

Wenzhou’s private capital has walked a long way to its own private banks, and has held shares in city commercial banks as well as small and medium-sized rural financial institutions. However, by far, there has been no private bank in China fully controlled by private capital. On March 28, 2012, the State Council approved Wenzhou a pilot region for a series of comprehensive financial reforms, which mainly focused on 12 reform tasks. The decision is considered a significant step towards Wenzhou private capital’s dream of setting up a privately funded bank. Furthermore, the Third Plenary Session of the 18th CPC Central Committee in 2013 announced, China will open up its banking sector wider, on condition of strengthened regulation, by allowing qualified private capital to set up private banks, which makes Wenzhou’s dream of establishing a private bank closer.

"After the State Council announced to explore the possibility of allowing private capital to set up private banks, financial leasing companies etc which bear their own risks in July 2013, Wenzhou began to work with relevant authorities and finalized the draft scheme for the pilot programme of setting up a private bank funded by private capital. Then, after approval from relevant authorities, the draft was submitted by the Zhejiang Provincial Government to the State Council.” Told by Yu Qian, deputy director of Wenzhou’s Financial Reform Office.

"The reason why private banks are highly anticipated is that private banks are hoped to address private enterprises’ financing difficulty and support SMEs’ development. Meanwhile, China’s banking sector is where state-owned capital takes a dominant position. By bringing in private capital, the banking industry in China is likely to have some changes.” Said by Guo Tianyong, director of the Research Center of the Chinese Banking Industry, Central University of Finance and Economics. “Giving the green light to private banks is the first step for China’s banking sector to comprehensively deepen reforms.”

According to Shang Fulin, the trial of five private banks in China will be pushed forward in a prudent manner by the principle that after one bank matures, the approval of the next one will be reviewed. In the future, Wenzhou will strictly abide by the requirements of China’s banking authorities and complete all preparations to insure the preparatory work approved and make Wenzhou’s private bank a reality as early as possible.


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