MARKET WATCH

MARKET WATCH

OPINION

Serving Private Lending

On April 26, the Wenzhou Private Lending Registration Service Center was officially launched in Wenzhou, east China’s Zhejiang Province, marking a major step forward in legalizing private fi nancing.

The financial reform in Wenzhou has two highlights. First, the number of microcredit companies will increase to 100 in 2013 from 30 today, according to Chen Derong, Secretary of the Wenzhou Municipal Committee of the Communist Party of China.

Second, a private lending service center is being established to provide locations to private lending intermediary agencies, gather and release all concerned information and take lending registration. Also, the service center will gather information for individuals,institutions and enterprises, match potential lenders with borrowers and offer services such as third-party authentication, asset evaluation,credit management and fi nancing guarantee.

Micro-credit companies are actually private lending companies. Their risks are under control because they don’t take in deposits and are operated locally. Because they are scattered in townships and villages, they can cover small and micro-sized financing services that large or medium-sized fi nancial institutions would generally overlook.

Different from micro-credit companies,the service center is a platform, where all lending services can be acquired in time.

There are people who badly need money and people who have extra money in hand.The center matches the lending side and borrowing side and also offers other services such as asset evaluation, guarantee and auditing.

It’s predicted that, in the future, the thirdparty payment system will be introduced into the platform to precisely supervise every deal.

Through this platform, lending activities with an interest rate higher than four times the official benchmark lending rate will be prohibited and every deal can be strictly supervised in time.

Then, why should people register their private lending activities in the service center,since it’s not compulsory?

Two major topics dominate the financial arena: risk control and risk pricing. The biggest advantage of establishing a lending service center is that the local government can control the risks of private lending, prohibit loan shark activities and avoid fraud. Through this platform, risks of private lending can be largely reduced.

Also, if lending and borrowing information can be gathered in one place, capital can have market-based prices and the interest rate can fl uctuate within a certain range. The biggest value of the center is to vitalize private lending and control its risks.

But if there’s no information, the center won’t see any deals. The private lending service center can learn from real estate agencies.

Real estate agencies are not compulsorily service organizations required by the government or the law for selling or buying second-hand housing. But most potential buyers and sellers will resort to them for their services. The reason is simple: safety and convenience. Real estate agencies can match potential buyers and sellers because they have much information. They can also offer a series of services such as housing price evaluation and notarization. Although real estate agencies will charge a large amount of commission, their clients will think the payment is worthwhile because of the value of their services. More importantly, real estate agencies have third-party payment system, which solves the credit issue for buyers and sellers.

In light of this, the success of the lending service center relies on the services, on the amount of the deals and on their effective matching service for both sides.

Establishment of the lending registration service center is only a small step. But if it can make people feel safer to borrow money, the center will be a big success.THE MARKETS

IPO Approved

China Postal Express and Logistics, the country’s largest courier service provider,received approval from the China Securities Regulatory Commission for an initial public offering (IPO) in Shanghai.

It plans to issue up to 4 billion shares on the Shanghai Stock Exchange to raise 9.98 billion yuan ($1.59 billion). The funds will be used to pay for the expansion of distribution centers and warehousing facilities and the purchase of trucks.

The company, a unit of the state-owned China Post Group, operates 4,152 distribution centers and 24,691 delivery routes.

China’s express delivery industry is expected to witness growth by leaps and bounds over the next few years. Deliveries will rise 21 percent annually, with revenues expected to grow 20 percent on average, according to the 12th Five-Year Plan (2011-15) for the express delivery industry released by the State Post Bureau.

Promising Automaker

Chinese carmaker Chery Automobile Co. will make efforts to export at least 171,000 units this year, said Jin Yibo, a company spokesman.

Chery’s worldwide sales reached 17,412 units in April, up 39.1 percent year on year and 40.1 percent from March. Exports are expected to exceed 20,000 units in May, said Jin.

The company, based in east China’s Anhui Province, has 16 production bases around the world and its products have been exported to more than 80 countries and regions. In 2011, Chery exported a record 160,200 vehicles, maintaining its status as a leading auto exporter in China.

Chery recently had many new moves in its worldwide expansion. In March, Chery and Indian-owned luxury carmaker Jaguar Land Rover announced they had reached an agreement on setting up a joint venture in China, and the two sides will hold equal shares. Chery opened a plant in Venezuela last August and has another plant under construction in Brazil, which is expected to start operations in 2013. It also announced plans to build assembly plants in Myanmar and several African countries.

This is an edited excerpt of an article by Ye Tan,a financial commentator, published in the Shanghaibased news magazineXinmin Weekly