Silicon Valley Bank Speeding up Expansion in China

Silicon Valley Bank, a unit under the aegis of US-based financial service giant SVB Financial Group (NASDAQ: SIVB), is looking to pile into Shanghai, a financial hub in China, when foreign direct investment (FDI) into the city cools off.

The bank opened a representative office in Yangpu, a prosperous district in Shanghai, on September 1, 2009, two months after it gained go-ahead from the China Insurance Regulatory Commission (CIRC).

The move, according to market observers, is part of a planned business expansion in the country that started in late 2005, when the company set up a wholly-owned consulting unit in the city. SVB Business Partners Shanghai, launched at the end of 2005, acted like investment consultants in the country, pointed out a market observer.

Foreign investors in pursuit of an access to Mainland China are expected to profit from the recovering economy through FDI projects in the financial service sector, according to industry insiders.

Notably, foreign banks like Silicon Valley Bank have managed to expand their investments in China by teaming up with local financial service companies rather than dipping toe in FDI projects. The Santa Clara, Californi-headquartered bank charted a course for its business deployment in China before opening the office in the country.

In 2008, SVB Financial Group, together with All Noble Investments Limited (NEA), one of the biggest venture capital funds in the US, took part in a ownership reform of Uni-power Guaranty, a credit guarantee firm in Zhejiang Province, eastern China, inputting as much as CNY 84.9814 million into the Chinese company. After the investment, SVB took a 30% stake in Uni-power Guaranty.

Earlier on August 24, 2007, Silicon Valley Bank joined hands with some partners for the launch of Shenzhen SVG Guarantee Investment Co., Ltd. to cut into the financing service and venture capital service market in China.

"Previously, Silicon Valley Bank has never set foot in venture capital markets out of home directly in a bid to guard against possible risks," pointed out another market observer, noting that a slew of financial service firms in want of a foothold in China are replicating the Silicon Valley Bank model - they are looking to make investments through local financial service institutions across the country.

In July, Shanghai saw capital inflow to Shanghai under the FDI projects grew 0.9% year on year to USD 910 million although the number of FDI contracts withered 42.8% to 206.

(USD 1 = CNY 6.83)

Source: www.nanfangdaily.com.cn (September 14, 2009)

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