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President Wan Xiaofang: Leveraging the “Belt and Road” with a Brilliant Future for the International Development of Financial Leasing
In the keynote speech that finance helps the construction of the “Belt and Road”, Wan Xiaofang, President of our company released her speech titled Leveraging the “Belt and Road” with a Brilliant Future for the International Development of Financial Leasing, and showed her views on that what kind of development opportunity would be faced by the financial leasing format, how to play the unique role of financial leasing and how to control the risk of cross-border etc under the “Belt and Road” initiative. Now the full text of the speech is published as follows.
Leveraging the “Belt and Road” with a Brilliant Future for the International Development of Financial Leasing
Ladies and Gentlemen, good morning!
It is a great honor on behalf of Minsheng Financial Leasing Co., Ltd to make a speech now.
Just now, the speakers gave full account of the opportunities and practices of "Belt and Road" international cooperation. As an open path, the "Belt and Road" will inevitably depend on financial support in the interconnection and intercommunication of infrastructure, trade and currency etc for the dozens of countries along the "Belt and Road". As a representative of financial leasing industry, now, I want to take this opportunity to exchange my views with you on that what kind of development opportunity will be faced by the financial leasing format, how to play the unique role of financial leasing and how to control the risk of cross-border etc under the “Belt and Road” initiative, and hope to give you some inspiration.
Now, I make my speech of Leveraging the “Belt and Road” with a Brilliant Future for the International Development of Financial Leasing, which consists of three parts:
First, the "Belt and Road" brings a new historic development opportunity for the financial leasing industry;
Second, the global layout based on the “Belt and Road” has been an significantly strategic choice of financial leasing industry in China;
Third, the prevention capability of cross-border risk is the cornerstone of leasing enterprises to develop the “Belt and Road” business.
First, the "Belt and Road" brings a new historic development opportunity for the financial leasing industry;
The going-away 2017 has a special significance for the financial leasing industry in China, which is just the 10th anniversary that China Banking Regulatory Commission (CBRC) amended to release the Administration of Financial Leasing Companies Procedures and approved five commercial banks to set up financial leasing companies as pilot projects. Based on the increasingly-improved regulatory, accounting, legal and taxation environment etc and fully-released dividend policy during the past ten years, the leasing industry experienced the first opportunity of vigorous development, with rapid expansion of scale from less than 20 billion Yuan in 2007 to nearly 6 trillion Yuan now, and number of leasing enterprises from initial dozens to nearly 8000 ones at present. As an important part of the financial system, financial leasing industry has a greatly-enhanced popularity, playing a positive role in the service of the real economy.
A number of Chinese leasing companies represented by Minsheng Financial Leasing have been able to participate in international competition after a rapid development. Under the general background of national “Belt and Road” initiative and economic transformation, Chinese financial leasing industry is now following the going-out pace of “made-in-China” to usher a newly-historic development opportunity, which is mainly reflected in two aspects as follows:
First, the global layout of "made-in-China" industrial chain has effectively led to the demand for cross-border leasing. The “Belt and Road” initiative has spread already in the countries and regions of Asia, Africa and Europe so that quite a number of Chinese companies are seeking effective integration of industrial chain on a global scale by active establishment of plants, investment and acquisition. The consequent cross-border financing demand has opened up new space for Chinese financial industry, especially the leasing industry, to actively participate in international cooperation. The "made-in-China + Chinese leasing" also drives the leasing enterprises to "go out" in a comprehensive and three-dimensional way. For example, in some large projects, the leasing companies help construction machinery of made-in-China for export in leasing way, and address equipment financing needs for Chinese enterprises to contract overseas projects. All the major nodes of "made-in-China" global layout are expected to become the driving force for the leasing business to extend overseas market.
Second, the cross-border resource allocation of globalization has built a wider platform for cross-border leasing. In recent years, the anti-globalization trend simmers with the characteristics of strong protectionism and flow barrier of resource elements, even so, economic globalization brings the world division of labor, which is still an irreversible trend. The “Belt and Road” initiative launched by China has become a new round of effective strength to promote the globalization, and the consequent cross-regional cooperation and resource integration is undoubtedly the most inspiring opportunity for the financial leasing industry which integrates funds-financing and matter-financing, and flexibly implements cross-region and cross-period allocation of resources. With funds as the starting point, the leasing companies lease the globally-made equipment to the countries along the “Belt and Road” so as to not only realize cross-border allocation of resources but also to open up a wide space for their own development.
Second, the global layout based on the “Belt and Road” has been an significantly strategic choice of financial leasing industry in China
As China's economy has been increasingly integrated into the global economic system, Chinese leasing companies have also begun to internationalize process. After several years of accumulation and exploration, some leading leasing companies, with very high level of specialization in some sectors, especially have found a new space for growth in cross-border leasing sectors such as import and export of aircrafts, ships and equipment. At present, Minsheng Financial Leasing owns more than one-fifth of cross-border cooperative business, and will launch the construction plan of an international team.
In the period of historical opportunity, it has become an important strategic choice for most leasing enterprises to preferentially implement layout along the “Belt and Road” and then gradually radiate all over the world. The leasing market of aircrafts and ships with higher level of globalization is the important strategic breakthrough of leasing enterprises.
With Minsheng Financial Leasing as an example, it develops extensive cooperation with mainstream manufacturers such as Boeing and Airbus etc and airlines in the sector of aircrafts, with business covering a number of countries along the “Belt and Road” such as Turkey, India, Malaysia, Indonesia, Georgia etc. In the sector of ships and marine engineering equipment, it also actively supports domestic mainstream shipyards to export their advanced ships and ocean drilling platforms to Europe, Southeast Asia, the Middle East, South Asia and other regions.
Last year, my company cooperated with Trafigura Group--one of the world's three biggest traders to develop operational leasing business of 11 asphalt ships, mainly for PUMA energy projects, with shipping routes covering a number of countries such as Vietnam, Indonesia, Myanmar etc, which highlights the typical leasing characteristics and also made certain contribution for the improvement of maritime transportation system along the “Belt and Road”.
In addition to aircrafts and ships, we also actively follow up the export of engineering machinery and other equipment, and make full preparation for Chinese enterprises to further develop international market. In recent years, we have cooperated with Sany Heavy Industry, Zoomlion, Liugong Machinery, Xugong Group and other major manufacturers to actively help them open up overseas market and to simultaneously expand our own overseas financial leasing business of construction machinery. We are also trying to implement cross-border cooperation on energy projects such as thermal power and photovoltaic projects, and hope that through leasing business, China's technology and experience will benefit more developing countries along the “Belt and Road”.
Third, the prevention capability of cross-border risk is the cornerstone of leasing enterprises to develop the “Belt and Road” business
While capturing the strategic opportunities brought by the “Belt and Road” to seek development, we cannot ignore the prevention and control of cross-border risks. Cross-border business inevitably faces the political, economic, legal, cultural and other differences of the countries along the “Belt and Road”. It is one of the keys to successfully enter the international market that Chinese enterprises can integrate into the local environment and adapt to all kinds of differences, which also put forward higher requirements for the risk control and prevention ability of financial institutions.
The “Belt and Road” initiative, for example, derives a large number of infrastructure construction projects such as seaports, airports, railways, nuclear power, telecommunications and so on, which operation and management is more complicated than that of domestic projects due to the characteristics of longer payback period and huge funds, coupled with the political, diplomatic, cultural, and other non-economic factors. Unlike other financial formats, the risk control mode relying on the leased items to guard against the rent recovery risk makes products leasing have a unique advantage in the cross-border business. We have seen various forms of leasing projects in the construction and operation of Gwadar Port in Pakistan, namely a key project in the China-Pakistan economic corridor. In addition to traditional financing methods such as bank credit, it is a good choice that the countries along the “Belt and Road” alleviate financial pressure by leasing way to import advanced equipment from China.
With the increasing number of countries and regions radiated by financial leasing, it will be an important task for the leasing companies how to disperse and hedge risks. In the future, leasing enterprises should enhance the risk prevention and control ability by combining their own characteristics and partners' advantages:
First, rely on the advantages of leasing to realize the professional asset management and disposal, and control the cross-border risk through the property right. Based on the ownership control of the leased items, we should build perfect asset management capability which helps the leasing companies to bring back the leased items in a timely manner after risk exposure, and reduce the loss of project defaults through the re-circulation or disposal way. Although there exist deficient regulatory and legal systems in some developing countries along the “Belt and Road”, the concept of "property rights" has been widely accepted and protected on a global scale. From this point, it is one of the key points of cross-border business risk prevention to play fully the control function of leasing on “property rights”.
Second, strengthen cooperation with large-sized manufacturers and international contractors to build a long-term partnership of shared interests and risks. These enterprises have implemented local management practice in the countries along the “Belt and Road” for many years, and been more familiar with local policy environment, operating environment, labor standards, environmental requirements and so on. From the point of our actual operation, these first experiences indeed help the construction of effective barrier of risk. We should deepen the cooperation and establish long-term cooperative partnership with them, not just limit to a single project cooperation, which not only benefits Chinese leasing companies to further open the overseas market but also can depends on the local relations and resources of manufacturers and contractors to achieve the whole course and real-time monitoring of the leased assets.
Third, promote win-win cooperation among various financial formats and diversify and hedge cross-border business risks. Just now, Chairman Yang (Yang Zaiping, Secretary General of the Asian Financial Cooperation Association) and Vice President Zhang (Zhang Yanling, former Vice President of Bank of China) also mentioned the positive significance that the Chinese "going-out" enterprises conduct mutual cooperation. Collaboration indeed enhances the transparency of information, and all partners may analyze the possible risks from their own different perspectives. It is essential to decision-making by combining sufficient information and multi-dimensional consideration.
For the leasing companies going abroad under the guidance of national “Belt and Road” initiative, they shall be more based on their overseas development ability, and actively promote the cooperation among various financial formats to jointly resist cross-border risks. On the one hand, we should use the funds of different sources and channels, such as securities, and banks, etc., and use the risk identification and control advantages of various funds to optimize the projects. Simultaneously, we can make full use of the successful experience accumulated overseas, improve the recognition of the funds providers to the projects so as to effectively integrate all kinds of financial resources and to explore more quality projects.
On the other hand, based on credit insurance as a risk hedging tool, for example, leasing insurance tailored to the leasing projects by Chinese credit insurance companies, it can effectively realize credit enhancement of projects so that the leasing enterprises open up a new prospect rapidly in a relatively unfamiliar market environment.
Ladies and gentlemen, the “Belt and Road” initiative provides the common development opportunity for the corporate entities and financial institutions. We should comply with the trend, seize the opportunity to work together, and play a positive role in the economic development of the countries along the “Belt and Road” and even of the whole world so as to highlight the modern strength of the ancient eastern civilization. In this great process, Minsheng Financial Leasing is willing to work with you to make progress together.