Chunping Group buys US bank

Wenzhou SME council urges leveraging financial tools

China Chunping Group, an agricultural trading company, recently acquired a small-sized US bank in order to build a financial base for its own businesses, Zhou Dewen, president of the Wenzhou Council for the Promotion of Small and Medium-Sized Enterprises, told the Global Times Saturday.

The Wenzhou, Zhejiang Province-based company, which sells rice and packaged herbal teas in China, paid $60 million for a bankrupt bank in Delaware in November last year, and re-branded it as USA New HSBC Bank, the people.com.cn, a news portal, reported earlier.

The report cited the company's chairman Lin Chunping as saying that the new bank would mainly take small deposits and focus on serving the overseas Chinese community in the US. Meanwhile, Zhou, who is familiar with the case, said that by setting up a branch of the bank in China in the future, the company could easily use the banking profits to finance its domestic businesses.

"Wenzhou should leverage the power of the capital. The capital operation generates cash flow in a relatively short period of time, and the companies can use it to support the long-term development of their businesses," Zhou said, adding that the combination of product and capital operations could be a solution for the companies to overcome financing issues.

China Chunping Group said on its website that it recorded revenues of 5 billion yuan ($791.4 million) in 2011. The company could not be reached for comment yesterday as it was closed for holidays.

Many small- and medium-sized enterprises in Wenzhou are facing financial difficulties which are no less stringent than last year, Zhou said.

About 20 percent of the local SMEs halted production or closed in 2011, according to the council.

The situation has been exacerbated by a monopoly of the domestic financial sector by a few State-owned banks, which are less and less willing to lend, while the private firms, such as Chunping Group, are blocked from entering the sector despite the central government's call to open it up, Zhou said.

"China should carry on with the economic reform and break the financial monopoly to allow better financial services for the enterprises," Zhou said.

Henry H. McVey, head of Global Macro & Asset Allocation at KKR, a US private equity firm, wrote in a recent report that Chinese banks would tighten lending this year. "We expect recent trends to reverse course as banks are forced to acknowledge that the lending bonanza of 2009 was rather extreme."