Du Yunfei, president of the trade finance division, China Minsheng Banking Corporation, discusses boosting its supply chain financing capabilities to give clients the capital strength to support their expansion efforts.
May 06, 2015 | Foo Boon PingChina Minsheng Banking Corporation (CMBC) was established in 1996 in Beijing, as one of China’s first national joint-stock commercial banks. The bank differentiates itself from bigger state-owned banks and commercial banks by focusing on the overlooked non-state owned enterprises (NSOE) and private companies across a diverse range of industry sectors.
CMBC has over 1,000 branches and offices throughout the country and over 1,500 overseas bank relationships. It was first listed on the Shanghai Stock Exchange in 2000, and obtained a listing on the Hong Kong Stock Exchange in 2009. By the end of 2014, CMBC was drawing revenues in excess of $6.6 billion with assets valued at more than $514 billion.
Speaking about the bank’s focus on the non-state owned enterprise (NSOE) sector, Du Yunfei, president of the bank’s trade finance division, said that the most pressing issue that private enterprises in China face today is liquidity management. In terms of working capital, there is a dearth of tools to help companies manage liquidity and access funds to meet the demand of daily operations.
As China’s economy slows in recent months, banks are rethinking and often shrinking their loan books that further aggravate the difficulty of private enterprises in accessing funds for daily production and operations.
“In my view, the major problem of Chinese private enterprises is not one of business performance but of aggressive expansion and investments, often into areas not core to their main activities. They lack the capital strength to support these expansionary investments. Consequently, these expansionary activities do not generate any positive cash flow or profits and result in substantial liquidity problems for the companies,” Du elaborated.
CMBC sees supply chain financing as a tool that could help private companies, which traditionally face significant problems in getting bank financing to access much-needed liquidity.
“Cash flow for business activities has become a key factor for enterprise competition in the marketplace,” he added, “which is where CMBC’s expertise comes to the fore.”
For CMBC, the supply chain financing and transaction banking business in general have become a top priority. Despite the change in economic climate, its basic direction on supply chain finance has not changed.
“Our direction can be summarised in two parts—the first is to continue to grow and become stronger in the supply chain business, and the second is to enhance service capabilities and promote renminbi cross-border investment for Chinese private enterprises going abroad,” he remarked.
Du said that more supply chain financing products will be developed to improve the bank’s transaction banking capability as a whole. CMBC launched its online settlement and clearing system in 2006. In 2014, it launched a corporate foreign exchange trading platform. In 2015, new initiatives planned include an internet trade finance processing platform and the development of an enhanced business operating model for the domestic trade and supply chain financing business. Today, CMBC has one branch in Hong Kong and are taking steps to open another in Singapore.
The trade finance business accounts for over 20% of CMBC’s corporate business revenue today, with supply chain financing business as the main contributor. The bank has plans to integrate all the transaction banking businesses under a single larger division.
Du shared that the growth of CMBC’s trade finance business in recent years is due to its focus on trade finance as a specialised and strategic business unit. This allows the trade finance department to lead and drive engagement with clients and to provide integrated financial solutions to meet the end-to-end financing needs of both the domestic and international trade businesses of its customers.
Categories:
China, Corporate Supply Chain Management, Financial Supply Chain Management, Liquidity Risk, Operational Risk, Risk and Regulation, Rmb, Trade Finance, Transaction Banking, Capital MarketsKeywords:China Minsheng Banking Corporation, Working Capital, NSOE
