Connect with us

Private Equity

China Regulatory Failure to Contain Financial Excesses Putting Off Some Foreign Investors — South China Morning Post

The inability of Chinese financial regulation to contain financial excesses has put off many foreign investors who would otherwise want to put their money into the country, analysts said. The key problem is that Beijing has not yet found a way to meet the large demand by small private sector businesses, investors and entrepreneurs for …

China Regulatory Failure to Contain Financial Excesses Putting Off Some Foreign Investors — South China Morning Post Read More »

Avatar

Published

on


The inability of Chinese financial regulation to contain financial excesses has put off many foreign investors who would otherwise want to put their money into the country, analysts said.

The key problem is that Beijing has not yet found a way to meet the large demand by small private sector businesses, investors and entrepreneurs for credit through legal and regulatory compatible financing channels, analysts say. Until it does, it will continue to contend with a series of quasi-legal and highly speculative financing channels to meet that funding demand that will pose additional risks to the nation’s financial system.As the examples of the rise and fall of the shadow banking systems and peer-to-peer (P2P) lending platforms show, creative Chinese financiers will continue to push against – and, if needed, circumvent – the bounds of law and regulation to create highly lucrative ways to meet the capital demands of small businesses and investors.

Foreign investors also want to take advantage of the strong need for credit in China, but uncertainty over the regulatory environment has put many of them off.

“There is huge demand and private equity funds in the West are beginning to lend. However, they are demanding sky-high rates due to the huge risk of lending to private corporates in China that often have unstable funding and during a time of slowdown in China. For these reasons, only the larger funds with good research teams will jump in with any strength,” said Andrew Collier, managing director at Orient Capital Research.

Oaktree Capital Group, one of the world’s largest alternative investment firms, told the South China Morning Post last year it would continue to invest in distressed debt and equities in China despite the growth of sour loans.China’s latest efforts to overhaul its deeply troubled billion dollar P2P lending industry are unlikely to dampen the appetite for credit or tackle broader issues of debt and financial risk in the world’s second largest economy, analysts said.

“China’s private sector is as capital starved today as it has been perhaps for 20 years or more,” said Peter Fuhrman, chairman and chief executive of China First Capital, an investment bank based in Shenzhen. “So there are creditworthy Chinese borrowers habituated to paying what by international standards quite high interest [rates]. The challenges remain not inconsiderable. At the top of the list is tougher government regulation on nonbank lending.”

Investors in Chinese online peer-to-peer lender Ezubao chanting slogans during a protest in Beijing after the platform turned out to be a giant Ponzi scheme. Photo: AFP

Investors in Chinese online peer-to-peer lender Ezubao chanting slogans during a protest in Beijing after the platform turned out to be a giant Ponzi scheme. Photo: AFP

Beijing has taken steps to tighten regulation of P2P platforms since 2015 amid a spate of high-profile company collapses and scandals that have rocked the industry and trapped the savings of millions of people.

The internet-based lending platforms match private investors with individuals and small companies that want to borrow, providing a lifeline for entities that have trouble accessing the traditional banking system.

The number of mainland P2P lenders has shrunk significantly over the past four years, from some 6,000 platforms operating in 2015 to just 572 in October this year, according to P2P tracking portal Waidaizhijia. But although the industry’s reputation for risky lending has attracted greater regulatory oversight, P2P lending continues to play an important role in China’s economy.

“P2P has looked like an attractive way to get capital to smaller firms and to regions of the country that have low access to bank lending,” said Collier.

“However, most of the money is going into speculative investments in property, along with established securities such as the better grade corporate bonds. The regulators go back and forth on how much freedom they want to give to this sector.”

To tackle financial risks in the banking system, China has already taken a hard stance against shadow banking, which often involves many forms of off-balance-sheet lending from banks and nonbank financial firms, by rolling out new regulations to focus on supervising asset management businesses and products of commercial banks.

So far China’s effort seems to have made a significant difference to slowing the growth of the shadow banking industry. Rating agency Moody’s estimated that broad shadow banking assets shrank by nearly 1.7 trillion yuan (US$242 billion) in the first half of 2019 to 59.6 trillion yuan (US$8.4 trillion), the lowest level since the end of 2016.

Broad shadow banking assets declined only slightly to 64 per cent of nominal gross domestic production (GDP) at the end of June 2019 from 68 per cent at the end of 2018. But they were down 23 percentage points compared to the peak of 87 per cent of GDP at the end of 2016, Moody’s said.

Despite the crackdown by authorities, P2P lenders are likely to continue filling an important gap in the Chinese economy, according to analysts, although growth would be slower than during 2014 to 2018. Consultants Frost & Sullivan forecast P2P lending to grow in value to 2.17 trillion yuan (US$309.4 billion) by 2023, compared to 789 billion yuan (US$112 billion) in 2018.

“The explosive growth of the P2P industry since 2010 confirms there is huge and unmet demand for capital,” said Fuhrman. “Especially among smaller Chinese private sector companies.”

People protest over losses incurred in peer-to-peer investment schemes in front of the public security ministry of Dongcheng district in Beijing. Photo: Reuters

People protest over losses incurred in peer-to-peer investment schemes in front of the public security ministry of Dongcheng district in Beijing. Photo: Reuters

Part of the problem is that China’s banking system has not evolved to meet the demands of the private sector, which has been the engine of the country’s economic growth. Commercial banks prefer to lend to state-owned enterprises, which have implicit government backing, and are reluctant to lend to private companies because they are seen as being less creditworthy.

“In the past, non-performing [loans] were very high, so lending to small firms was discouraged,” Tian Guoli, the chairman of China Construction Bank, the country’s second biggest lender, said last year.

Squeezed between interest rates at P2P platforms that can be up to four times that charged by Chinese banks, and weak prospects of borrowing from large lenders, many small private companies have struggled to stay on top of debt.

The problem has been particularly acute through formal lending mechanisms such as the bond market. Between January and October this year, 93 private firms have defaulted on 278.7 billion yuan (US$39.6 billion) worth of Chinese bonds.

The overall default rate has now hit 1.51 per cent, a record high for the Chinese bond market since 2014, according to a report published by investment bank China International Capital Corporation last Friday. The default rate of a bond issued by a Chinese private company hit 11.82 per cent this year, nearly doubling from 6.18 per cent in 2018 and more than six times the rate of 1.89 per cent in 2017.

“While the overall liquidity in onshore bond market has improved, weak issuers will continue to face refinancing pressure over the next 12 months, because investors will remain risk averse towards them,” said Ivan Chung, an associate managing director at rating agency Moody’s.

The People’s Bank of China has called for risks associated with the P2P industry to be resolved by the first half of 2020, while some provinces like Hunan in central China have moved to ban the platforms altogether.

However, analysts said that given that much of China’s private sector is in need of cash to repay debt, the industry was unlikely to disappear, even amid growing regulatory scrutiny.

“It’s better to have greater transparency and regulatory oversight,” said Fuhrman. “The lending doesn’t stop, but the money becomes more expensive and risky for borrowers. This has a deadweight cost to the Chinese economy. The sooner the legitimate nonbank lending sector gets cleaned up and back in business the better it will be for China as a whole.”

https://www.scmp.com/print/economy/article/3036608/china-regulatory-failure-contain-financial-excesses-putting-some-foreign

Source: http://www.chinafirstcapital.com/blog/2019/11/07/china-regulatory-failure-to-contain-financial-excesses-putting-off-some-foreign-investors-south-china-morning-post/

Private Equity

20VC: Sequoia’s Roelof Botha on His Biggest Lessons Working Alongside Don Valentine, Mike Moritz and Doug Leone, Leading Sequoia’s US Business and What Sequoia Do To Retain Their Edge at the Top & The Crucible Moments That Define Startup Success

Roleof Botha is a Partner @ Sequoia Capital, one of the world’s leading venture firms with a portfolio including the likes of Airbnb, Instacart, Stripe, UiPath, Zoom, the list goes on. As for Roelof, at Sequoia he has led rounds into the likes of YouTube, Instagram, Eventbrite, Square, MongoDB, 23andMe and Unity Technologies to name a few. Before joining the

The post 20VC: Sequoia’s Roelof Botha on His Biggest Lessons Working Alongside Don Valentine, Mike Moritz and Doug Leone, Leading Sequoia’s US Business and What Sequoia Do To Retain Their Edge at the Top & The Crucible Moments That Define Startup Success appeared first on The Twenty Minute VC.

Avatar

Published

on

Roleof Botha is a Partner @ Sequoia Capital, one of the world’s leading venture firms with a portfolio including the likes of Airbnb, Instacart, Stripe, UiPath, Zoom, the list goes on. As for Roelof, at Sequoia he has led rounds into the likes of YouTube, Instagram, Eventbrite, Square, MongoDB, 23andMe and Unity Technologies to name a few. Before joining the world of venture, Roelof was the CFO @ Paypal playing a key role in their hyper-growth from 2000-2003.

CLICK TO LISTEN ON ITUNES

In Today’s Episode You Will Learn:

1.) How did Roelof go from actuary in South Africa to CFO @ Paypal? What were his biggest lessons from seeing Paypal burn $10M per month? How did Paypal lead to his joining Sequoia as a Partner?

2.) Market Evaluation: Does Roelof agree that the market is crazy today? How does today compare to prior vintages? How does Roelof assess the compression of fundraising timelines? With compressed timelines, how does he build relationships of trust with founders?

3.) Founder Evaluation: What were Roelof’s lessons on founder assessment from Don Valentine? What matrix did Don teach Roelof to assess founders on? How does Roelof feel about the rise of competitive rounds? When should founders take them vs remain heads down on execution?

4.) Investment Mentality: How did Roelof prevent becoming too confident when early investments went well? How does Roelof prevent relying on past failures as a reason for turning down opportunities today? What can investors do to retain a very flexible mind? Why does Roelof believe you are only as good as your next investment?

5.) Sequoia’s Edge: How does Roloef think about what it takes for Sequoia to retain it’s edge at the top? How does Roloef measure the success of the Sequoia scout program? How did they structure it? How has the structure changed? What do they plan to do moving forward?

6.) Board Membership: How would Roloef evaluate his current style of board membership? How has that style changed over time? What elements did he find challenging? What advice would Roelof give to new board members adopting their first board seats?

Items Mentioned In Today’s Show:

Roelof’s Favourite Book: Man’s Search For Meaning

Roelof’s Most Recent Investment: mmhmm

As always you can follow Harry and The Twenty Minute VC on Twitter here!

Likewise, you can follow Harry on Instagram here for mojito madness and all things 20VC.

Source: https://thetwentyminutevc.com/roelofbotha/

Continue Reading

Private Equity

Private equity investor Centerbridge Partners backs Syncapay’s acquisition of Wirecard North America

From: FinTech Global Syncapay has announced that it has bought Wirecard North America, marking another page in the story of the collapse of the scandal-ridden former FinTech giant. Wirecard imploded this summer after a suspected multi-billion dollar fraud was unearthed. Since then the company, which was once hailed as one of Germany’s biggest FinTech success […]

Avatar

Published

on

From: FinTech Global
Syncapay has announced that it has bought Wirecard North America, marking another page in the story

Source: https://www.altassets.net/private-equity-news/by-news-type/deal-news/private-equity-investor-centerbridge-partners-backs-syncapays-acquisition-of-wirecard-north-america.html

Continue Reading

Private Equity

Gulf Capital backs CWB as part of $60mln IP platform build

To read this article, you must be a paid subscription member. (Current members login here) […]

The post Gulf Capital backs CWB as part of mln IP platform build first appeared on https://africacapitaldigest.com.

Avatar

Published

on



To read this article, you must be a paid subscription member. (Current members login here)

Reserve your digital subscription today

Join now for $35 per month

Join now for $395 per year

for access to:

  • Weekly newsletter with original and curated news, analysis and perspective
  • Africa’s private capital deals, fund raises and the investment firms and executives involved
  • Portfolio company news that impacts value and stakeholder participation
  • Job moves and partnerships between leading market participants
  • Exclusive access to Africa Capital Digest’s full content archive

If you’d like more information on exceptional value group subscriptions for your colleagues and teams, please contact Teresa Hall at thall[at]africacapitaldigest.com today.

Source: https://africacapitaldigest.com/gulf-capital-backs-cwb-as-part-of-60mln-ip-platform-build/

Continue Reading
Saas1 hour ago

Saas1 hour ago

Saas1 hour ago

Saas1 hour ago

Saas1 hour ago

Saas1 hour ago

Saas1 hour ago

Saas1 hour ago

Saas1 hour ago

Saas1 hour ago

Press Releases2 hours ago

Hospital Outsourcing Market Size Worth $679.2 Billion By 2027: Grand View Research, Inc.

Press Releases2 hours ago

Villarreal Law Firm, a Leading Team of Trucking Accident Attorneys in Brownsville, Announces Archive on Trucking Accident Issues

Press Releases2 hours ago

Remodeling Market is Projected to Expand at 3.9% CAGR Through 2026; Global Market Insights, Inc.

Press Releases2 hours ago

TerraPay refuerza su entrada en Norteamérica con la licencia MSB en FINTRAC de Canadá

Press Releases2 hours ago

GVG appelle les décideurs à se saisir du potentiel du Big data

Press Releases2 hours ago

Remodeling Market is Projected to Expand at 3.9% CAGR Through 2026; Global Market Insights, Inc.

Press Releases2 hours ago

TerraPay consolide son arrivée en Amérique du Nord en obtenant la licence d’entreprise de services monétaires du CANAFE au Canada

Private Equity2 hours ago

20VC: Sequoia’s Roelof Botha on His Biggest Lessons Working Alongside Don Valentine, Mike Moritz and Doug Leone, Leading Sequoia’s US Business and What Sequoia Do To Retain Their Edge at the Top & The Crucible Moments That Define Startup Success

Private Equity2 hours ago

Private equity investor Centerbridge Partners backs Syncapay’s acquisition of Wirecard North America

Startup3 hours ago

The Unheard Story of Xero Degrees and Their Adorable Outlet at Patiala

Press Releases3 hours ago

DAS „AMERICAN HORROR STORY”-MÖRDERHAUS ÖFFNET ZUM ERSTEN MAL FÜR PARANORMALE HALLOWEEN-WOCHENEND-LIVESTREAM FÜR DIE ÖFFENTLICHKEIT

Press Releases4 hours ago

Biophytis Enrolls First Patient in Brazil in COVA, a Multinational Phase 2/3 Clinical Trial with Sarconeos (BIO101) for the Treatment of Patients with COVID-19 Related Respiratory Failure

Press Releases4 hours ago

Court of Arbitration for Sport (CAS) Invalidates World Athletics Rule Imposing Burden of Proof on Disabled Athletes to Prove No Competitive Advantage as Unlawful and Discriminatory, But Then Bars Double-Amputee Sprinter Blake Leeper from Competing on His Blades on Racially Discriminatory Grounds

Venture Capital4 hours ago

Australian Cyber Week 2020 showcases vibrant, growing sector

Startup5 hours ago

How to get job at Google? Things you should know while applying for a job at Google

Press Releases5 hours ago

De Havilland Canada Livre Deux Avions Dash 8-400 à Ethiopian Airlines

Saas5 hours ago

Saas5 hours ago

Saas5 hours ago

Saas5 hours ago

Saas5 hours ago

Saas5 hours ago

Saas5 hours ago

Saas5 hours ago

Saas5 hours ago

Saas5 hours ago

Press Releases5 hours ago

Canntab to Launch in Australia and Participate in Australia’s Largest Cannabis Research Study

Press Releases5 hours ago

TES Invests In Green Li-ion’s Cutting Edge Battery Recycling Technology

Press Releases5 hours ago

New Data On Mayne Pharma’s Tolsura® (SUBA®-itraconazole) Presented At IDWeek 2020

Startup5 hours ago

Tesla recalls nearly 50,000 Model S and X cars exported to China due to safety concerns over faulty suspensions

Trending