Joe Zhang: Shadow Banking in China, in a Way, Serves the Community too

“In spite of the stigma, the risky business helps serve the community by providing loans to those in need on flexible terms that real banks can’t” – Joe Zhang

Joe Zhang

Shadow banking is lending activities outside regular banks. Despite what some would say, it is a reputable business on the mainland. It fills a legitimate need. Despite some lingering stigma, the industry is not one I am ashamed to be in.

While the P2P operators are not legally allowed to guarantee the safety of investors’ money, they still find legitimate ways to achieve the same goal. For example, CRF charges borrowers a 5 per cent risk premium and pools the money to compensate investors in the event of a default. Yooli and Kaixindai, on the other hand, make small loans in partnerships with licensed micro-credit firms, and require their partners to guarantee the loans.

The borrowers in the P2P networks are similar to Yuqing’s customers, but a bigger and growing percentage are young white-collar workers who do not mind taking out a loan for a new car or a holiday in the Philippines.

Banking on the mainland is seen as a complex business (it is) and something that governments like to meddle in (they do). However, despite that meddling, ordinary people can find a way to help themselves … sometimes in the shadows of the “real” banks.

Full article at SCMP…

Joe Zhang

Joe Zhang is the Chairman of Slow Bull Capital based in Hong Kong, and also author of “Inside China’s Shadow Banking:  The Next Subprime Crisis” and 避開股市的地雷。Zhang was Chairman of Wansui Micro Credit Company in Guangzhou, China, from 2011 to 2012, . He was named “Microcredit Person of the Year” in January 2012 by the Microcredit Association of China.

He started Slow Bull Capital in 2012. Before starting his own business, Zhang worked at investment banks.  He was Deputy Head of China Investment Banking at UBS between 2008-11. From 1999 to  2006, Joe was co-head and head of China Research at UBS Securities Asia Limited. Prior to this, Mr. Zhang worked at the People’s Bank of China between 1986 and 1989. Zhang was chief operating officer of Shenzhen Investment (604 HK), a company listed on the Hong Kong Stock Exchange, between 2006-08.

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