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Tuesday, March 21, 2023

Why Chinese companies will feel little shock after SVB collapse

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The contagion effect of bankruptcy Silicon Valley Bank (SVB) of USA seems not to have affected (so much) China. Companies of the Asian giant report a “limited impact” after the fall of the Californian bank.

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In the midst of the tense relationship between United States and Chinawith the war of Russia and Ukraine background, this blow to world finances seems to have a “Domino effect”.

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China, far from the “contagion” effect of SVB

While analysts warn of global risks for global financial markets, China so far seems to emerge unscathed from this new “crack”.

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the fall of BLS exposed the failed monetary and financial policies of the government of USAand may trigger a domino effect of negative impact in financial markets around the world.

The emblematic case was the headquarters of the SVB of the United Kingdom (SVBUK), where the bank of englandto act quickly and generate trust in customers and companies that have their funds in the financial institution.

In Chinathe headquarters of the SVB is the SPD Silicon Valley Bank (SSVB)a joint venture between Shanghai Pudong Development Bank Co and SVB.

During the last hours they clarified that it is an independent entity registered in China, with a standard corporate governance structure and an independent balance sheet.

Why there was little impact on Chinese companies

The SSVB was the first technology and innovation bank in China, which aims to finance and contribute to the business development of Chinese technology entrepreneurs.

From the second quarter of 2022, SSVB serves more than 3,000 corporate clientsof which 31 were listed in China or abroad, the national news site “21jingji” reported.

An example of the low impact of the Californian BLS crash is Everest Medicines, a Zhejiang biopharmaceutical company dedicated to the development, manufacture and marketing of medicines and vaccines.

From Everest they specified this Sunday that the collapse of SVB has had a limited impact on the business of the company, emphasizing that its deposits in the bank are much lower than 1 percent of the total volume of its cash.

The keys

The reason for the smaller effect on Chinese finances, they explain, is that companies are protected by a “solid political and financial environment” of China, added to “strong growth momentum from new companies” local.

“The bankruptcy of SVB shows that US monetary policy is a complete failure. The faster than expected hardening of the US Fed created turmoil in the global financial system and ultimately damaged its own banking system,” he said. Li YongVice President of the Expert Committee of the China International Trade Association.

Li He warned that many US banks, especially small and medium-sized lenders, are in the same situation as SVB, which, if not managed properly, can unleash systemic risks and cause a ripple effect around the world.

“The strengthened regulation of the Chinese authorities of the platform economy in recent years, especially the policies that cracked down on monopolies and the disorderly expansion of capital, made lChinese startups were much more immune to the collapse of SVBsaid Dong Shaopeng, a senior fellow at the Chongyang Institute for Financial Studies at Renmin University of China.

“The BLS crisis offers other countries a lesson: they should not trust the financial system of the United States too muchwhich has loopholes, and instead should maintain independent financial and technology policies,” he concluded.

Source: Ambito

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