Fri. Jun 2nd, 2023

By Samuel Shen, Kane Wu and Roxanne Liu

SHANGHAI/HONG KONG (Reuters) – Surprised by the sudden collapse of Silicon Valley Financial institution, the principle go-to international financial institution for almost all of Chinese language start-ups, entrepreneurs and enterprise funds are scrambling for alternate 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 stated they’re nonetheless trying to transfer their cash out of SVB as soon as they will. A few of them are turning to greater U.S. banks, whereas a number of Chinese language lenders similar to China Retailers Financial institution and the Industrial & Business Financial institution of China are additionally dashing to fill the hole.

Such banks have provided account companies just 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 20 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 international financial institution of selection for younger corporations in China, advisors and firms stated.

“China Retailers Financial institution advised us they will arrange an offshore account for us inside every week,” stated one start-up founder who gave his surname as Hong, describing how he had been provided numerous proposals by banks, together with Zheshang Financial institution , 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 wrestle to pay their workers this week.

Nonetheless, Wu Yujun, chief govt at Hangzhou-based banking platform start-up QBIT, stated prior to now three days it had acquired six instances as many queries on creating accounts as traditional, principally from SVB purchasers.

CB Worldwide Financial institution, a U.S.-headquartered financial institution serving primarily Asian small- and medium-sized corporations, stated it has been contacted by many start-ups and U.S. greenback funds looking for to open accounts shortly to allow them to deposit funds they’ve withdrawn, or plan to withdraw, from SVB.

The financial institution’s chairman Sam Su stated the agency was additionally asking corporations to think about changing their USD holdings into offshore RMB deposits to diversify dangers.


Some enterprise funds stated 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 might safely open an account with,” stated an govt at a Chinese language enterprise capital fund with deposits at SVB who declined to be recognized as she was not approved communicate to media.

“Not a number of banks are pleasant to enterprise capital.”

China is dwelling to 1000’s of start-ups and enterprise capital funding is anticipated to get well steadily this 12 months after funding in 2022 was battered by the nation’s zero-COVID coverage, a share market stoop and U.S.-China rigidity.

“Withdrawal is the best choice however no different bankers within the U.S. present the extent of companies SVB used to supply,” stated an govt at a serious Chinese language funding financial institution, which has deposits at SVB by way of its personal fairness arm, including that the financial institution’s precedence is to have a minimum of “a number of accounts” in america.

Going ahead “everybody might want to arrange two accounts – one for home capital and the opposite for international capital,” stated Stephen Chen, co-founder of Shanghai-based start-up Lead Digital.

“However the market area left by SVB shall be crammed by the following financial institution, which is a chance,” stated 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; Modifying by Anshuman Daga and Christina Fincher)

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