“Retail Banking” With a New Twist

By Charles H. Green
From Beijing, China

It’s interesting to follow stories about international lending in countries stretching from the United Kingdom to Australia. I like to keep an eye on business credit wherever it happens in search of the similarities and differences of how bankers deliver capital to small companies.

China has been something of a mystery to many Americans, depending on the age at which you learned about China in school. That story has been evolving since President Nixon’s historic 1972 trip to China that eventually led to an opening of relations, economic ties and yuan-vs-dollarcooperation unimagined following armed conflicts in Korea and Vietnam.

The Chinese economy has grown by leaps and bounds since the end of the Mao era and recently eclipsed Japan to become the world’s second largest economy. That said, in 2011 the GDP of this nation of 1.3 billion people is only about 48% as large as the United States.

Chinese banking is conducted by the state with credit largely allocated to other state-controlled industries and politically connected. This has meant that most small business owners had to rely on a network of illegal loan sharking to find growth capital as the economy expanded rapidly over the past 20 years.

These conditions may be changing as the central government pledged to lower economic controls and encourage more investment by opening banking. Bank regulators invited a number of manufacturers and retailers to apply for banking licenses, which are expected to be approved early next year.

So far some of the nation’s leading companies have applied, including air conditioner manufacturer Gree, electronics retailer Gome and online service provider Alibaba. Their interest ranges from online payment management, consumer and business credit to regular deposit collection.

How these reforms affect the average Chinese business owner remains to be seen, but clearly there are many new opportunities opening for private companies getting to participate in lending.

Want a credit card to buy that flat-screen TV?

This entry was posted in AdviceOnLoan
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