WASHINGTON, D.C., September 9, 1999 — The
International Finance Corporation has for the first time become a shareholder
in a Chinese domestic bank, through a US$22 million equity investment in
the Bank of Shanghai (BOS), which provides financing for the many small
and medium enterprises (SMEs) in Shanghai.
The investment, representing 5 percent in BOS's expanded share capital,
will be used to strengthen the bank's capital base and management to help
it operate to international standards and practices.
IFC director for East Asia and the Pacific, Mr. Javed Hamid, said that
IFC's equity investment, coupled with an ongoing technical assistance program,
would build the quality of the Bank of Shanghai as well as providing a
model for other Chinese banks. The investment is a way to help foster the
modernization of China's domestic banking industry and encourage more participation
by foreign banks, he said. This is one of only two approvals that the Chinese
government has allowed for foreign participation in a fully licensed domestic
Since BOS primarily supports local SMEs, this project will also extend
IFC's reach to the rapidly growing SME sector in Shanghai which has been
constrained by the inadequacy of financial services.
BOS was established in 1995 through a merger of urban credit cooperatives
in Shanghai, representing a significant step in the reform and development
of China's financial sector. The shareholders of BOS include the Shanghai
Municipal Government and 13 district governments with a 30 percent stake;
11 large state-owned enterprises in Shanghai with an 8 percent; more than
2,000 SMEs holding 28 percent; and 38,000 individuals, including most of
the 4,500 employees of BOS, with 34 percent.
Since mid-1995, IFC has assisted BOS with its efforts to transform into
a modern banking institution, providing a total of $1.3 million through
grants from the government of Japan, the European Union, and IFC itself.
This program, one of IFC's largest technical assistance undertakings to
date, enabled IFC to team up – first with the Allied Irish Bank and then
with ABN/AMRO Bank – to provide wide ranging technical assistance to BOS.
The mission of IFC, part of the World Bank Group, is to promote private
sector investment in developing countries, which will reduce poverty and
improve people's lives. IFC finances private sector investments in the
developing world, mobilizes capital in the international financial markets,
and provides technical assistance and advice to governments and businesses.