HSBC courts China tech start-ups with loans

HONG KONG • HSBC has launched a two billion yuan (S$413.1 million) lending facility aimed at technology start-ups and other new industries in China's Pearl River Delta region.

This move intensifies the battle for a slice of a business that is growing despite a slowing economy.

Showered with money from private investors over the last few years, promising technology start- ups in China - the world's second- largest economy - have shunned traditional lenders, seeking to instead raise funds directly from equity investors.

But global banks no longer want to be left out after the success of companies like Alibaba and Tencent, which have seen their revenue doubling over the last couple of years despite a broader economic slowdown that has hurt earnings for other sectors.

As a result, banks such as HSBC and Citigroup, as well as a host of Chinese lenders, are now courting emerging Chinese firms by offering loans and other banking services.

With the launch of its "innovation fund" for small and medium-sized companies in Guangdong province, HSBC plans to target this promising segment and boost its client base.

"The target customer will be those (that) are high-end, high- tech start-ups and enterprises... those enterprises that are upgrading the use of technology and ability to innovate, like, for example, using robotics to manufacture more efficiently," said Mr Montgomery Ho, HSBC's chief executive for Guangdong.

The new loan facility will allow HSBC to offer other banking services to these companies, such as cash management as well as hedging of interest rates and foreign exchange, he said.

Mr Ho added that the selected companies would get preferential interest rates and service fee waivers as part of the new initiative.

The southern China region, which counts Shenzhen and Guangzhou among its biggest cities, is home to 11 industrial cities set to fuse into one megalopolis.

It has a gross domestic product that is already bigger than Indonesia's, and is transitioning from being a traditional manufacturing base to a tech powerhouse.

Mr Ho said that HSBC is on track with its growth plan in the Pearl River Delta, which anticipates adding 4,000 employees in the region over the medium term to the roughly 1,200 people that it had at the end of 2015.

REUTERS

A version of this article appeared in the print edition of The Straits Times on December 15, 2016, with the headline 'HSBC courts China tech start-ups with loans'. Print Edition | Subscribe