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China Securities News:

Last year, the investment-lending linkage pilot program was launched. What has been the progress of the pilot program? Is there any plan to approve additional institutions on this program? The second question is about private banks. The private bank program was also launched last year. So far, according to the statistics released by CBRC, the program was running pretty well. This year, some private capital and listed companies have again expressed a desire to set up private banks. So what will be the trend of private bank development this year? Thank you.

Guo Shuqing:

The investment-lending linkage pilot program is in the trial and exploration stage. We should be positive and prudential with regards to the program. So far, there is no detailed plan for it, but a bank has done their capital landing, and they are boosting their progress. I noticed a question from the list, asking if there is no such program in the United States and European countries, or if it is not a mainstream practice and so can it work in China? In my opinion, it is not a major problem. China can have something that the United States doesn't have, such as spicy hotpot. But what we have to pay attention to is the possibility that linking investment and lending will bring more risks, so it's better to combine it with innovation in science and technology.

For the second question, it is a good thing that private capital enters the financial market, and it is necessary for China's economic development. It's especially necessary for the areas that the financial service doesn't cover or fully cover and that have inadequate competition. But there is also a big risk that we have to take notice of. We must adopt some measures to prevent a minority of people or capital from controlling the bank and turning it into a cash machine for connected transactions. Taking public deposits for their own investment will no doubt bring high risks, which may result in serious consequences. We have to prevent this from happening.

Wang Zhaoxing:

We all know that China's current financial pattern is dominated by bank-led indirect finance, which accounts for 90 percent of all indirect finance. Most of the banks are traditional banks, which specialize in traditional credit operations, including liquidity loans and fixed asset loans. They are not familiar with risk identification, judgment, measurement and management on high-tech innovative enterprises, which is a big challenge for banks. Meanwhile, these enterprises feature light assets, with high uncertainties and risks, without any tangible assets for mortgage, so they have also encountered many difficulties in financing.

With this background, we initiated the investment-lending linkage pilot program, making equity investments for start-ups and growing enterprises and supporting them with bank loans later to establish a complete supporting chain. As a brand new exploration, the program also means a lot of risks and challenges for traditional banks. So we encourage pilot projects.

We have selected five cities for pilot projects, including Shanghai, Beijing, Tianjin, Xi'an and Wuhan. A total of 10 banks are involved. In addition to setting up new institutions, we are also preparing negotiations with technology enterprises that may receive equity investments in the future. A project database will be built. Once the subsidiary companies are approved by the State Council, the project will be on the fast track.

Cao Yu:

Now, I’ll briefly introduce our work on private banks. A pilot program on private banks was carried out in 2014 during which we approved five such banks. In 2015, we made systemic preparations and improved various rules. By 2016, we saw normalized and regular operation of private banks. Therefore, we approved the establishment of 12 more last year, three of which have already started business. The operation of private banks last year was generally smooth. By year-end, the total assets of the existing eight private banks reached 180 billion yuan, and their outstanding loans stood at about 80 billion yuan. These banks have already begun serving the needs of society and the overall economy, and the legal and orderly operation of private banks has been achieved. Thank you.

Guo Shuqing:

Thank you all for your attendance, today. You are always welcome to offer your advice and suggestions on our work.

Hu Kaihong:

Today’s press conference ends here. Thank you every one.

 

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