Commercial Bank Industrial Chain Financing Program

Now, China is the second largest economy entity around the world, some research institutions even believe that20or30years later, China with take place USA, becoming the largest one globally. But, comparing with its higher-ranking GDP, the financial services in China is still underdevelopment, the situation now is that banks leading the field, capital market can never actually play a role. This unhealthy financial market has already cause lots of problems, both in real and virtual economy, like the shadow banking chaos in Wenzhou last year and the higher cost of financing in China. So, in order to realize our goal to become the world largest economy entity and the double effect on economic growth from consumer demand and investment demand, regulator has set out their plan to balance the capital and monetary market, like marketization of interest rate and encourage capital market innovate some loan-like financial instruments. These actions forcing banks make out ways to pass their traditional business red-line, so some subprime corporations becomes the clients of banks’loan business, but this can also bring more risks, cause these corporations seems fragile in their industry individually and the default rate may be very high. So, how to deal with this has been generally discussed in banking sector during this time. Industrial chain finance may be the answer. Industrial chain finance is financial service base on the trading between core-enterprises and its upstream and downstream enterprises. With the guarantee of the core corporations and some innovated off balance sheet products, like electronic financial products and investment banking products, banks can reach its service to the whole chain, and this activity can not only help enterprises integrate the chain, but also broadening banks’business region. Beside, risks must be alerted, this pack-loan business will exposure to industrial risk, so the target one must match the nation’s future needs and regional characteristics. Maybe in this way, can banks welcome their own new profit growth.