SHANGHAI/HONG KONG, March 13 (Reuters) – Shocked by the sudden collapse of Silicon Valley Financial institution, the primary go-to overseas financial institution for almost all of Chinese language start-ups, entrepreneurs and enterprise funds are scrambling for options regardless of U.S. regulators averting a banking disaster by guaranteeing all deposits of the troubled financial institution.
Chinese language start-ups and fund managers mentioned they’re nonetheless trying to transfer their cash out of SVB as soon as they’ll. A few of them are turning to larger U.S. banks, whereas a number of Chinese language lenders reminiscent of China Retailers Financial institution (600036.SS) and the Industrial & Business Financial institution of China are additionally dashing to fill the hole.
Such banks have supplied account providers much like these of SVB, however discovered it onerous to crack the U.S. financial institution’s dominance amongst early-stage start-ups in China, the place SVB has operated for greater than twenty years and has a neighborhood three way partnership.
As SVB was one of many few banks that made it straightforward for start-ups to open financial institution accounts for greenback financing, it was the dominant overseas financial institution of selection for younger firms in China, advisors and corporations mentioned.
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“China Retailers Financial institution advised us they’ll arrange an offshore account for us inside per week,” mentioned one start-up founder who gave his surname as Hong, describing how he had been supplied quite a few proposals by banks, together with Zheshang Financial institution (2016.HK) , to unravel his points with SVB.
CMB, ICBC and Zheshang Financial institution didn’t instantly reply to requests for remark.
On Sunday night, U.S. banking regulators moved swiftly to backstop all deposits at SVB, which was shuttered on Friday, placing to relaxation fears that startups would battle to pay their staff this week.
Nonetheless, Wu Yujun, chief government at Hangzhou-based banking platform start-up QBIT, mentioned prior to now three days it had obtained six occasions as many queries on creating accounts as traditional, largely from SVB shoppers.
CB Worldwide Financial institution, a U.S.-headquartered financial institution serving primarily Asian small- and medium-sized firms, mentioned it has been contacted by many start-ups and U.S. greenback funds in search of to open accounts rapidly to allow them to deposit funds they’ve withdrawn, or plan to withdraw, from SVB.
The financial institution’s chairman Sam Su mentioned the agency was additionally asking firms to think about changing their USD holdings into offshore RMB deposits to diversify dangers.
STILL HUNTING
Some enterprise funds mentioned they have been in a quandary as SVB had sure benefits and was particularly pleasant to early-stage begin ups.
“We’re nonetheless trying to find a financial institution which we may safely open an account with,” mentioned an government at a Chinese language enterprise capital fund with deposits at SVB who declined to be recognized as she was not licensed communicate to media.
“Not a whole lot of banks are pleasant to enterprise capital.”
China is dwelling to hundreds of start-ups and enterprise capital funding is predicted to get better step by step this 12 months after funding in 2022 was battered by the nation’s zero-COVID coverage, a share market hunch and U.S.-China rigidity.
“Withdrawal is the simplest choice however no different bankers within the U.S. present the extent of providers SVB used to supply,” mentioned an government at a significant Chinese language funding financial institution, which has deposits at SVB by way of its non-public fairness arm, including that the financial institution’s precedence is to have at the least “a number of accounts” in the USA.
Going ahead “everybody might want to arrange two accounts – one for home capital and the opposite for overseas capital,” mentioned Stephen Chen, co-founder of Shanghai-based start-up Lead Digital.
“However the market house left by SVB will probably be crammed by the following financial institution, which is a chance,” mentioned Chen, whose firm counts Sequoia Capital China and Wu Capital amongst its buyers and banks with SVB.
Reporting by Samuel Shen and Li Gu in Shanghai, Roxanne Liu in Beijing, Kane Wu and Selena Li in Hong Kong; Writing by Kane Wu and Brenda Goh; Enhancing by Anshuman Daga and Christina Fincher
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