PAN Guangwei, China Banking Association

    Amsterdam, June 13, 2018

Dear Chairman Baydar, Secretary General Peter Mulroy, Vice Chairman SUN Jianbo, distinguished guests, Ladies and Gentlemen, 

    Good evening to you!

    I am very delighted to host the "China Night" again. In the 50th anniversary of the FCI, in this beautiful city of Amsterdam, tonight we gather here to exchange on the latest reforms and the outlook of Chinese factoring industry. On behalf of the China Banking Association, I would like to extend my warm welcome to all the guests who have come from afar, and sincere thanks to the China Construction Bank for sponsoring this event. 

    At the FCI annual meeting held in Lima, Peru last year, CBA hosted the "China Night" for the first time to promote the communication and cooperation between the Chinese and foreign factoring industry. This year, we continue to host the “China Night” to enhance the communication and cooperation between the Chinese and foreign factoring industry. 

    Factoring is a financial service in the form of accounts receivable financing. After more than two decades of development in China, it has expanded from international factoring to domestic factoring and from commodity trade to service leasing, growing and innovating both in the business scope and depth. Driven by the continuously deepened reform and opening, factoring, as one of businesses that most directly serve the real economy, factoring has been steadily growing and recovering in the past year in China. In 2017, the banks’ factoring business volume reached 2.15 trillion yuan, an increase of 25% year-on-year. Among them, the domestic factoring business volume was 1.66 trillion yuan, up 36% year-on-year. Plus the commercial factoring volume of 1 trillion yuan, together we have 3.15 trillion yuan, accounting for 3.68% of China’s GDP in 2017.

    The rapid growth of factoring business in China fully confirms the two trends I mentioned last year, that we should see “the unique advantages of factoring as a counter-cyclical integrated credit instrument” and “potential of China’s factoring business compared to other countries as China’s ratio of factoring business volume to GDP is relatively low”. However, in the new era, we should also see that the China's factoring industry faces new challenges and opportunities.

    Firstly, the regulatory environment for China's factoring business has changed. In May 2018, the China Banking and Insurance Regulatory Commission took over the regulation of commercial factoring companies from the Ministry of Commerce. The new policy promoted consistency in setting and enforcing regulations on products of the same nature, increased regulatory synergy and narrowed the space for regulatory arbitrage. And we’ll create a safer and more conducive environment and pave the way to continued growth.

    Secondly, the development of Fintech raised new requirements for factoring business and product innovation. Fierce competition among homogeneous products gave rise to a large number of alternative trade financing products, which, to a certain extent, has squeezed the space for expansion of the bank’s factoring products. Ever changing Fitech will also inevitably lead to revolution of business model and operational rules in the factoring industry. That’s why we are now planning on building an authoritative and sound business management system based on block chain technology to advocate factoring business innovation in the banking industry.

    Thirdly, China now needs more than ever professionals who are familiar with international rules. At present, we need more than ever   people who know the global trends and international rules. The shortage of such people has restricted the development of two factor international factoring, which means we should strengthen cooperation and team building.

    After winter there always comes spring. Despite of these challenges, China's factoring industry will have greater opportunities. The Belt and Road Initiative has played an active role in connecting regional resources, invigorating the market, creating new economic growth points and promoting economic development. It has also brought many development opportunities to the world's factoring industry. 

    In face with these opportunities and potential, I would like to share with you some of my opinions and suggestions on how to further develop the factoring industry.

    First, factoring should return to the origin and serve the real economy. As the Chinese government advocated, supporting real economy should serve as the starting point and final goal of the financial sector. Factoring is a financial transaction in which a business sells its accounts receivable and usually do not need to provide additional guarantees or collaterals. It can effectively relieve the business’ pressure caused by high accounts receivable, help the SMEs to raise funds and avoid credit risks. Factoring makes funding affordable for the SMEs and helps them with the accounts receivable management, assuming the risk of bad debt and so on. We should actively respond to clients’ diversified demands, and expand business and product system to keep up with the growing economy. 

    Second, we should create new model to make supply chain finance smarter through technological innovation. Fintech can be more an opportunity than challenge to the factoring industry. To do factoring business requires us not only to improve financial service networking, but also to tap the full potential of electronic and internet channels and make the most of new technologies such as ABCD, namely AI, Block-Chain, Cloud Computing and Data Analysis etc., all of which can be used to improve business analysis and risk management as well as the quality of service.

    Third, we should strengthen international cooperation and think globally. There is huge development potential for the infrastructure construction and industrial integration in countries along the Belt and Road. The rising economic activities in those countries provide an opportunity for the development of international factoring. But at the same time it requires us to speed up the research and convergence of domestic and foreign rules and train international professionals, so as to contribute to the development of international factoring.

    Last year, we signed a letter of intent with FCI. Tonight, we will go on to sign the MOU here which allows us to set up a long-term mutually beneficiary mechanism through in-depth cooperation in training, and information exchange to make factoring more technology-based, compliant and innovative. CBA will join hands with FCI to promote sustainable and healthy development of factoring business across the world. We hope that we will work together to promote cooperation with deepening reforms, to seek win-win results through openness and jointly start a whole new chapter for the global factoring development.

    I wish China Night a good night to you. Thank you.