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Value Partners forms JV to tap into Western China’s small loan market
16 September 2011
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News, Asia, China
Value Partners Group Limited has entered into an agreement to establish a joint venture (JV) company to engage in small loan business in Chengdu City, Sichuan Province.
The group principally provides investment management services to investment funds and managed accounts. The formation of the JV company will be the Value Partners’ first venture into other financial services in the Mainland, which will allow the group to produce alternative income stream with a new business.
The JV firm is to be established by Brilliant Star Capital, a wholly-owned subsidiary of the group, and Chengdu GT Emerging Industries Investment Co Ltd, which is wholly-owned by Chengdu Industry Investment Group Co Ltd, an investment holding company controlled by Chengdu State-owned Assets Supervision and Administration Commission (Chengdu SASAC). Brilliant Star Capital will own 90% of the JV company whilst its joint venture partner will own 10%.
The registered capital of the joint venture company will be 300 million yuan (US$47 million), of which 270 million yuan will be provided by the Value Partners in cash, while the rest will be provided by Chengdu GT Emerging Industries Investment Co Ltd. It is intended that the JV company will provide small loans to small to medium size enterprises and small business owners in Chengdu. The transaction is subject to approvals by the relevant Mainland authorities.
“As the government outlined its policy to develop the western regions in its 12th five-year plan, Western China is set to be a key driver of the Mainland’s economy. We see an unfilled demand of small to medium size enterprises for small loans as major commercial banks tend to focus primarily on more sizeable businesses,” said Jimmy Chan Sheung Lai, chief executive officer of Value Partners.
According to government figures, Chengdu’s GDP growth in the first half of 2011 was 15.1% year-on-year, significantly outpacing the national GDP growth rate of 9.6% for the same period. The GDP of the western region is expected to double that of 2008 by 2015, with an annual growth rate of over 10%.
Despite surging needs for small loans on the back of fast economic growth, loans granted to small enterprises by major banks in the Mainland meet only 15% of the overall financing needs of those enterprises, with loans under 1 million yuan almost non-existent, and SMEs are facing considerable difficulties in securing financing. In 2010, the size of mainland’s small loan market reached 195 billion yuan, while geographically the central and western regions account for an increasing portion of the small loan market.
“We are delighted to work with our local partner which has vast local resources to develop the business together,” Mr. Chan added. “Our foray into the high-growth small loan business will provide an alternative source of revenue for Value Partners. An independent, dedicated team of seasoned professionals will be formed to operate this business locally.”
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