China

They have better asset quality and funding profiles.

Chinese fintech has caught the eyes of investors around the world with its explosive growth in the past half-decade. In our recent report Fintech in China: Hitting the Moving Target, we dissect this explosive growth, examine the imminent shift in the underlying value driver, and delineate the implications for market participants and investors. Since 2013, major segments of the fintech market — online peer-to-peer lending, online wealth management, digital insurance, and third-party payment — have doubled or even tripled every year. For example, the outstanding loan balance for online peer-to-peer lending platforms surged from RMB31 billion in January 2014 to RMB856 billion three years later. Such growth triggered massive injection of venture capital into China’s fintech. After achieving a staggering CAGR of 300% over the past three years, at $6.4 billion in 2016, China has overtaken the US as the global leader in fintech venture capital activities and represents 47% of total such investments, according to a KPMG report. Value driver shifting from “Fin” to “Tech” China has had a structurally imbalanced financial system with an underdeveloped infrastructure when compared to established markets. The structural shifts resulting from the Chinese government’s recent financial reform efforts, coupled with the skyrocketing internet and mobile penetration, has created an opportunity for fintech players to bridge the gaps in traditional financial services and serve the long tail of Chinese consumers by capitalising on their strong online presence and loose regulation. Nevertheless, the unregulated growth has led to several high-profile scandals. The Ezubao (E租宝) peer-to-peer lending platform made history as the biggest-ever financial fraud case in China after raising more than RMB1.5 billion in a Ponzi Scheme. Such incidents created growing concerns and prompted policymakers to incorporate fintech into the regulatory framework. As the window of regulatory arbitrage closes, future fintech leaders will differentiate themselves by pushing the frontiers of technological innovation and disrupting traditional financial services business models through three key technologies: big-data analytics, the Internet of things (IoT), and blockchain. Together, these technologies will create significant disruptions along value chains and bring about distinctive values for each of the four major areas of financial services: financing, investing, insurance, and transaction. Consider consumer finance as an example. The IoT created new, innovative sources of non-financial personal data that can be analysed using big-data analytics to aid the credit approval process, effectively expanding the “lendable” population. What does it mean for China’s fintech market participants and investors? The potential for growth in China’s fintech remains massive, and players of all sorts will attempt to penetrate the market. While there is no one-size-fits-all formula for success, we see five key factors that can increase its likelihood

Citi has appointed Guorong Jiang as Managing Director, Chairman and Head of Corporate and Investment Banking (CIB) for China. He reports to Mark Slaughter, Head of Corporate and Investment Banking for Citi in Asia Pacific, with a matrix reporting line to Christine Lam, President and Chief Executive Officer of Citi China. 

But PwC said large commercial banks were 'spared the worst of pain'.

Off-balance-sheet WMPs filled the gap between assets and deposits.

The PBOC's balance-sheet claims on depository institutions hit US$1.4t as of July.

When one door closes, another one opens up. As deleveraging moves up in the scale of objectives of the Chinese leadership, banks now face more restrictions from regulators. In any event, this is not the first time they find themselves in the regulatory whirlpool. From the usage of repo agreements to wealth management products (WMPs), and most recently negotiable certificate of deposits (NCDs), banks have been very creative in playing the cat and mouse game in front of evolving regulations.

Loans are gradually repriced whilst deposit rates will likely remain unchanged.

The banks' net profit rose 7.9% in Q2.

The banks registered NIM expansion of 4-8bp.

Rust belt banks use shadow banking to conceal their bad loan status.

China Construction Bank eyes raising at least $15b.

The regulators and financial institutions seemingly have played a “Whack-A-Mole” game, says BBVA.

It represents almost a fifth of bank deposits.

Net corporate bond issuance has been increasing.

The value of third-party payments in China grew more than 74 times from 2010 to 2016.