Financial Services Talking Points | 26/01/2017

In today’s talking points; The People’s Bank of China to be first to issue Digital Currency;  China’s property and financial sectors growth slower in Q4 Rise of the fintech Dragon; HNA Group continues it’s acquisition spree

The People’s Bank of China to be first to issue Digital Currency

The People’s Bank of China (OBOC) has completed a successful trial of a digital acceptance exchange, moving closer to becoming the first central bank in the world to issue its own digital currency. The completed trial involved transactions and settlements of bank acceptance bills using a digital currency it developed, supported by block chain technology- a secure digital ledger that records online transactions. Several commercial banks participated in the test run including, the Industrial and Commercial Bank of China, bank of China and the WeBank. The PBOC say that China’s digital money will be legal tender backed by the central government, ultimately, both digital and paper currency will be in circulation.

Read more at: Caixin

China’s property and financial sectors growth slower in Q4

Growth in China’s real estate and financial sector slowed in the fourth quarter of 2016. On the 20th of January, China reported that its economy expanded by 6.8 per cent in the fourth quarter due to strong consumer spending ad record bank lending. A detailed breakdown in economic growth issued by the NBS showed growth in China’s property market slow to 7.7 per cent in the fourth quarter from 8.8 per cent in the third. It also highlighted a slowdown of the financial sector which decelerated from 5.8 per cent growth in July-September to 3.8 per cent in the fourth quarter. State owned newspaper Economic Daily warned that some Chinese firms have shown ‘the dangerous tendency of overly favouring virtual industries than the real economy’.

Read more at: Reuters

Rise of the fintech Dragons

According to Citigroup’s report, China has overtaken North America as the global leader in ‘fintech’ investment. The report had attributed the shift in power as the rise of what they term as “Chinese dragons”. China makes up over 50% of all fintech investment globally in the first nine months of 2016. In regards to venture capital, China has doubled its share in global investment from 19% to 46%. In comparison, the US went from 56% to 41% of global fintech venture capital investment. Although US had more fintech ‘unicorns’ (start- ups valued at $1 billion or more), there is a larger concentration of wealth in China. The Chinese Dragons are raising more capital and are achieving larger private valuations compared to the Unicorn. The difference in the nature of fintech start ups between the US and China is that the US unicorns opt for niche areas, whereas the Chinese dragons aim for broad and encompassing “one- stop financial shops”.

Read more at: Fortune 

HNA Group continues it’s acquisition spree

 HNA Group has bought ANZ’s asset finance business, UDC Finance for $626 million. ANZ has also sold it’s 20% stake in Shanghai Rural Commercial Bank in order to “progress on ANZ’s strategy to streamline its business and improve capital efficiency”.  This deal is in line with ANZ aiming to reduce it’s relatively high proportion of capital being weighed down by corporate loans. During this deal, ANZ was advised by Deutsche Bank and HNA by Nomura. UDC is a New Zealand asset based finance firm. The firm will become part of HNA’s diverse operations not limited to airlines, leasing, insurance and real estate. HNA also has a 20% stake in Virgin Australia and acquired Allco Finance’s aircraft leasing business out of receivership. According to Bloomberg, HNA Group has been making acquisitions worth $US34.1 billion.

Read more at: Australian Financial Review