41331 public disclosure authorized - world...

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Volume 35, 1 April – 30 June 2007

IFC Executive Vice President and CEO Visits PEP-China Programs in Xinjiang and Beijing

Dissemination seminars on new Property Law and Movables Financing Held

Receivables Registry Pilot under Development PEP-China Promotes Use of Credit Bureaus in Banking PEP-China Promotes Commercialization of Credit Reporting System International Symposium on Bank Leasing Held in Beijing Banking Competency Certification: more than 200,000 People Enrolled in Foundation Examination MOU for SME Lending Project with Bank of Nanjing Signed in Chengdu Credit Analysis Workshops Held in Henan Province Credit Analysis Workbook Published HR Component of the TA to LCCB Project Launched North Andre Linkages Program Prepares for Certification Audit More Technical Training Delivered to Dairy Farmers in SW China PEP-China Staff Plant Trees to Echo IFC’s Footprint Program Business Edge Master Trainers Certified Business Edge Holds Human Resources Seminar in Chengdu Sub-national Doing Business Yields Initial Findings Book on Business Membership Organization (BMO) Management Published CHUEE’s first Program Advisory Committee Meeting Held in Beijing CHUEE’s Banking Partner Recognized by the Financial Times Sustainable Banking Award Energy Efficiency Market Mapping in Beijing and Tianjin Completed

Recent Business Highlights

First CHUEE Loan in Western China Approved Visitors to PEP-China

Mr. James Weaver, Ms. Sevi Simarvi, Mr. Everett Wholers, Ms. Yvonne Pang, Ms. Wang Jici, Mr. James Weaver, Mr. Pan Xilong, Mr. Wu Yonghong, Ms. Irina Niederberger, Ms. Ary Naim, Mr. Alexander Schmidecker, Mr. Ernst Mehrengs, Ms. Vesa Kantee, Mr. Fritz Peter, Mr. Walter Ripper, Mr. Tony Liu, Ms. Galina Ho, Mr. William Lim, Mr. Narayanasamy Kokularupan, Mr. Ulrich Zeisluft, Mr. Brian Cooper

People Among Us

Mingyu Ma, Operations Officer, Access to Finance

Coming Up Soon

� Draft report on “Private Sector Quality and Sustainability Standards” will be reviewed by a workshop in July in Beijing

� A workshop on middle and low income housing will be held in collaboration with the State Council’s Development Research Center in July in Beijing

� A workshop on receivables financing is scheduled for September in Nanjing

� Business Edge program will finish an evaluation survey of its trainers by September 2007

� CHUEE Program will launch orientation session with the 2nd banking partner, Bank of Beijing, in August

� A study on the energy efficiency market in the cement industry will be completed by CHUEE team in August 2007

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Recent Business Highlights

IFC Executive Vice President and CEO Visits PEP-China Programs in Xinjiang and Beijing

IFC Executive Vice President and CEO, Mr. Lars Thunell, visited China from 29 May to 2 June, 2007, during which Mr. Thunell visited two IFC PEP-China programs. His first stop in China is Urumqi, the capital city of Xinjiang Uigur Autonomous Region, a frontier region in Northwest China. Lars chaired a roundtable with local stakeholders of IFC’s Business Edge program, including officials from

the Xinjiang SME Center, Business Edge certified trainers, and local entrepreneurs. The discussion focuses on the effectiveness of Business Edge and the impact on the SME training market and local SMEs’ performance. Participants express strong support for the interactive and practical teaching methodology of Business Edge. After the roundtable, Lars observes a Business Edge Training course delivered by a certified trainer. Lars’ trip to Xinjiang demonstrates IFC’s commitment and support to SME development in the frontier regions of China.

During his trip to Beijing on 1st June, Lars signed a risk sharing agreement with Bank of Beijing (BOB), the second partner bank of the IFC China Utility-Based Energy Efficiency Finance Program (CHUEE). Under the cooperation framework, IFC will provide a risk-sharing facility, enabling BOB to leverage an overall loan portfolio of RMB 300 million (US$39 million) energy efficiency projects. The Bank is the first city commercial bank in China to enter sustainable finance. With the implementation of the CHUEE program, BOB will obtain technical assistance from IFC PEP-China on SME credit rating, risk pricing, cash-flow analysis, and due diligence for energy efficiency projects. This assistance is expected to improve BOB’s ability to finance energy efficiency projects as well as support its SME lending in general.

The IFC East Asia and Pacific (EAP) Regional Director, Richard Ranken, also visits the PEP-China team in Chengdu on 15 May, 2007. During his meeting with staff, Mr. Ranken emphasizes the importance of Advisory Services as a key product of IFC, especially to enhance development impact in frontier regions and sectors. Dick also updates staff on progress of the current decentralization pilot in East Asia and on the new “Global/Local” strategy. He stresses the importance of combining global knowledge and expertise with a

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strong local presence to understand market conditions and respond to client needs. He also emphasizes to staff the key IFC values of professionalism, integrity and teamwork.

Access to Finance

IFC PEP-China Holds Major Dissemination Events on new Property Law and Movables Financing

Following the approval of the Property Law by the National People’s Congress (NPC) in March 2007, IFC PEP-China quickly organizes, in collaboration with FIAS and PBOC, two major events in Beijing in April. A high-level national symposium on Property Law and Movable Assets Financing was held on 17 April, attended by about 300 participants from NPC, the Supreme Court, different Ministries, financial institutions, and law firms. The event is extensively reported by news media in China. This is followed by a workshop for commercial bankers on Receivables and Inventory Financing. The events disseminate the secured transaction provisions of the Property Law and their implications for movables financing, and educates the bankers about the operational aspects of receivables financing. Among others, it is emphasized that the development of an asset-based lending (ABL) industry, which is almost non-existent at present in China, will help to bring finance to those enterprises that cannot be covered by traditional banking services.

Receivables Registry Pilot under Development

To create a replicable model of modern security interest registration, PBOC has been working on a receivables registry pilot since early this year with the support of IFC PEP-China and FIAS. Over the last few months, the joint project team of PEP-China and FIAS has provided critical guidance and inputs to the design of the pilot, help organize two study tours to North America and New Zealand, comment on the draft system specifications, and develop a prototype regulation. In parallel, the team provides substantial knowledge support to the State Administration of Industry and Commerce (AIC), which has also decided to reform their own system (used mainly for equipment), after having been involved in the activities of the Secured Transactions Reform Project for the past two years. It is hoped that, in due course, a unified modern security interest registration system will emerge in China from these and future reform efforts.

IFC PEP-China Promotes the Use of Credit Bureaus in Banking

Since 2003, IFC PEP-China has been supporting the development of a credit reporting system in China. After several years of efforts, the consumer credit bureau is successfully put into full operation in 2006. The current priorities are to enhance the quality of data

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and to promote the use of credit bureau products by lending institutions. In this context, IFC and PBOC jointly sponsored a symposium on Credit Reporting and Retail & SME Banking in Tianjin on 20-21 June, 2007. The conference attracts more than 300 bankers from across the country; practically every bank in China (including some Rural Credit Cooperatives) is represented in the meeting. IFC helps to mobilize 10 first tier international speakers, including several from the leading credit bureaus in the world. In his opening remarks, PBOC’s Deputy Governor Su Ning comments highly about the role of IFC in assisting the credit reporting system development in China. The symposium

introduces the potential benefits of credit bureau products and best practice in using bureaus in the process of retail and SME banking.

IFC PEP-China Promotes Commercialization of the Credit Reporting System

China’s credit reporting system has accumulated records of 540 million individuals, including 80 million individual borrowers, and 12 million corporate entities of which 8 million are borrowers. While this is undoubtedly an impressive achievement, the system cannot remain a pure public service if it hopes to be integrated smoothly into the operational process of credit providers. Commendably, the Chinese government has moved to formally separate the business operations of the credit information system from PBOC-CISB, and set up the China Credit Reference Center (CRC) in April 2007. This is consistent with the thrust of previous recommendations from IFC. Thus, CRC has been established initially as a semi-commercial public service unit based in Shanghai. In June 2007, PEP-China and IFC’s Global Credit Bureau Facility organized a team of international experts to conduct a five-day diagnostic review of CRC, and provided a series of suggestions to sharpen its business focus, improve its data quality, and diversify its product line.

International Symposium on Bank Leasing Held in Beijing

Subsequent to the opening up of the bank leasing industry in March 2007, IFC PEP-China works together with the China Banking Regulatory Commission (CBRC) to organize an International Symposium on Bank Leasing with the purpose of promoting the concept to the banking industry. The symposium was held on 12 June in Beijing, with over 200 participants, including officials

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from regulatory agencies and existing and prospective leasing practitioners. Chinese banks are urged to explore the opportunities in financial leasing through setting up leasing subsidiaries. A Minister level official from the NPC indicates at the meeting that IFC has provided good support to the development of the Leasing Law, which is now ready for final discussion and approval by the relevant NPC bodies.

Banking Competency Certification: More Than 200,000 People Enrolled in Foundation Examination

Following the successful establishment of the certification system for the first two pilot positions (i.e., financial planning and risk management), the China Banking Association (CBA) has been working on the development of a Foundation Examination for all candidates as a prerequisite for accreditation in specific fields. The pilot examination was launched in the second quarter of 2007. The response has been extraordinary, with more than 200,000 people registered to attend the exam. Some banks now mandate that all new recruits must pass the test. This exceptionally high number of enrollment proves that banking competency certification is widely supported by the financial community, and has already generated significant impact on the industry. IFC PEP-China will also soon participate in a strategic meeting of CBA Certification Experts Committee to plan for new positions.

MOU with Bank of Nanjing Signed in Chengdu

On 1st June, 2006, a delegation led by Vice President Xiaoqi Zhou of the Bank of Nanjing visited Chengdu and signed a MOU with Mario Fischel, General Manager of IFC PEP-China, for a three-year Advisory Services project on small business lending. This represents a culmination of PEP-China’s efforts over the past two years to help the bank

develop a business line serving small enterprises. This work has already led to a three-fold increase in the bank’s small business lending volume, as well as a line of credit from IFC. The new phase of cooperation is designed to make the bank competitive in the small business market segment, streamline its processes, train the staff, and diversify its product range.

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Credit Analysis Workshops Held in Henan Province�In collaboration with the CBRC Training Center and the CBA, IFC PEP-China organized two credit analysis training workshops in Luoyang and Zhengzhou, respectively, in the relatively under-developed Central China Province of Henan in May 2007. About 270 bankers and regulatory officials participated in the training. The Luoyang workshop is supported by the Luoyang City Commercial Bank, one of the best performing local banks in the region. The Zhengzhou workshop, held in the PBOC Zhengzhou College, is targeting at internal trainers of commercial banks, aiming to spread best practice through a “train-the-trainers” approach. Both workshops are well-received and highly regarded by the participants. Several of the internal trainers have already started to offer their own training.

Credit Analysis Workbook Published

Over the past few years, and with the help of a credit expert, IFC PEP-China has been working on a comprehensive volume explaining the whole process of how to analyze and

assess a corporate borrower. Various drafts of the book have been tested in over 15 training workshops for different lending institutions across China. These efforts have now resulted in the publication of a 483-page book entitled Credit Analysis and Commercial Lending by the China Foreign Language Press in English. The book will hit the bookstores in July 2007 with commercial pricing. IFC PEP-China already receives many requests of how to order the book before it is published. The CBA intends to roll out a certification of Loan Analyst building on the materials in this book.

HR Component of the Advisory Services to LCCB Project Launched

During the second quarter of 2007, IFC PEP-China successfully started the last component of the advisory services to Leshan City Commercial Bank (LCCB) project, focusing on HR management issues. A diagnostic review has been carried out and a presentation on “International Best Practice in HR Management in Banks” has been made to the senior and middle management of the bank. Extensive interviews have also been conducted with various departments, and the initial findings and recommendations have been discussed with the bank’s management. The component aims to establish a performance-based HR system in the bank.

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Sustainability

North Andre Linkage Program Prepares for Certification Audit

Between April and June 2007, North Andre Linkages program finalized the EurepGAP QMS (Quality Management System) documents and signed contracts with local stakeholders including technicians and village leaders of pilot villages. EurepGAP, QMS, and internal audit training sessions have been delivered to North Andre staff, technicians, and farmers. The trial-run of the EurepGAP/traceability system started on 1st June. In addition, a user-friendly, cartoon-style EurepGAP handbook for farmers is under development. Infrastructure development in pilot villages, such as toilets and sign board, is underway, which will help 1747mu apple orchards and 1023 individual farmer households in the pilot villages to pass the certification audit of EurepGAP scheduled in October this year. (News contributed by QIU Min, Operations Officer)

More Technical Training Programs Delivered to Dairy Farmers in SW China

In April, the Dairy Linkages Program organized a Dairy Farmer Field School Training in Diequan, Yunnan. The training program is focused on how to better transfer technical skills to local dairy farmers. Thirty-two participants from New Hope Dairy and the local Animal Husbandry Bureau have attended this five-day training. To improve the management of New Hope Dairy Farms, the Program has provided dairy farm management software to two New Hope Dairy farms. At the end of May, a Dutch expert gave a one-week training session on application of the software in the New Hope Demonstration Farm in Hongya, Sichuan. The software provides a comprehensive database covering each cow in the farm, which enables farmers to identify the cause of problems through regular analysis of data on production, fertility, milking quality, health, etc. The analysis done by the software will result in recommendations of appropriate and timely measures. (News contributed by Longqing Fan, Operations Officer)

IFC PEP-China Staff Plant Trees to Echo IFC Footprints Program

On 13 May, IFC PEP-China staff and their families joined a tree planting activity in the countryside near Chengdu. This is to echo IFC’s Footprint Program which aims to raise awareness of sustainable development among IFC staff, their families and communities. Local villagers will look after 30 trees, which are labeled with IFC PEP-

China.

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The IFC Footprint Program is committed to make sustainability an integral part of IFC’s day-to-day work in the offices around the world and to continually improve environmental and social performance. The commitment extends to the individual and collective decisions that IFC staff make in the workplace, including reducing unnecessary travel by increasing capacity for video conferencing, coordinate community service activities, use public transportation, use less paper and recycle resources when possible, etc.

Management Development

Three Business Edge Master Trainers Certified

Three Business Edge Master Trainers have been certified by IFC PEP-China. The certification ceremony was held in Chengdu on 26th June, 2007. The three trainers, including two ladies, are all from Chengdu, where Business Edge was first launched in China. They are highly knowledgeable and experienced individuals who hold Master Degrees or above in business management. The selection process

required by Business Edge is rigorous, including three rounds of Training of Trainers (ToT), series of Master Trainer training, coaching, and practice. Master Trainers will then be qualified to conduct ToT courses. To date, 116 local Business Edge Trainers have received professional training delivered by Business Edge team since 2005. Business Edge program plans to train a pool of master trainers so that they can coach trainers in secondary cities and other provinces.

Business Edge Held Human Resources Seminar in Chengdu To help increase understanding and collaboration between Business Edge trainers and private companies in Chengdu, a Human Resources Seminar was held on 5 June, 2007 in the city. It is designed as a training seminar focused on “how to organize a successful training”. The seminar is delivered by a Business Edge certified trainer. More than sixty HR and Training managers and supervisors from local companies have attended the event.

Business Environment Enabling

Sub-national Doing Business Yields Initial Findings Entrepreneurs in general face more “red tape” during the process of starting and operating businesses in central and western China than in coastal areas, according to the

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preliminary findings of the sub-national Doing Business study. The final results will be released in October 2007, in the first of a series of annual report. The study, built upon the 120 city Investment Climate Assessment conducted by the World Bank in 2006, intends to transfer to Chinese institutions the Doing Business methodology for regularly updating and monitoring the reform process across the country. The main counterpart is the Chinese Academy of Social Sciences (CASS). Based on surveys of professional business service providers in five areas of business regulation -- starting a business, registering property, getting credit, enforcing contracts, and paying taxes – it investigates the friendliness of the business climate in each province by quantifying the cost of complying with business regulations. It intends to provide insights on the administrative barriers that private enterprises face and identify key areas for improvement. The study also monitors and evaluates the performance of governments at the local and provincial level. (News contributed by Wang Lihong, Operations Officer)

Book on Business Membership Organization (BMO) Management Published

�As a product of the previous Business Association Development Project, IFC PEP-China team has finalized the editing of the BMO Management book, which had been published by the Sichuan Publishing Group in the second quarter of 1997. The publication is a synthesized translation of a book by the Center for International Private Enterprises (CIPE) and the IFC SME Department’s BMO Toolkit. There are nearly 50,000 BMOs in China. Enhancing the professionalism of their management and operations is a serious challenge. This book is believed to be the first comprehensive text on the management of BMOs in China. It should contribute to enhancing the roles and internal management of BMOs in the country.

CHUEE

CHUEE’s First Program Advisory Committee Meeting Held in Beijing CHUEE program held its first Program Advisory Committee (PAC) Meeting in Beijing on 28 May, 2007. As members of PAC, senior officials from the National People’s Congress and from various ministries have attended the meeting, including MOF, NDRC, CBRC, SEPA, and SAFE. CHUEE donors, partner institutions, and other IFC departments also participated in the meeting.

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Mr. Calvin Xu, IFC CHUEE Program Manager, reports on CHUEE’s progress and achievements in the first six months. Government representatives congratulate the team on the strong early results. They appreciate the efforts of IFC in creating CHUEE to finance Chinese energy efficiency projects, and the strong support from the Finnish government and GEF. The meeting discusses the future development of energy efficiency sectors and policy implications for energy efficiency finance. The PAC meeting is followed by an open workshop attended by various energy efficiency market participants in China.

CHUEE’s Initial Bank Partner Recognized by the Financial Times Sustainable Banking Award

As the first bank partner of the CHUEE program, the Industrial Bank (IB) emerges as runner-up after Deutsche Bank in “the Sustainable Deal of

the Year” category at the Financial Times Sustainable Banking Awards ceremony held in London on 7 June, 2007. The award is one of five categories of the FT Sustainable Banking Award. IB is the first and only Chinese financial institution to be recognized by such an award.

IB signed the risk-sharing agreement with IFC on the energy efficiency finance program in Shanghai in May 2006, marking the first commercial bank in China to enter into energy efficiency finance. IFC has provided intensive technical assistance in the areas of project development, credit underwriting, EE project due diligence, and marketing to IB. By June 2007, IB has funded 10 energy efficiency projects with a total loan amount of RMB 146 million (US$18.8 million) across the country, helping China reduce greenhouse gas emissions by more than two million tons of CO2 and equivalent.

Energy Efficiency Market Mapping in Beijing and Tianjin Completed The CHUEE team has completed a study on the market potential for energy efficiency (EE) investments in Beijing and Tianjin. The study estimates that the total investment in EE projects in the two cities during the period of 11th Five Year Program will reach RMB 16.7 billion, and the number of EE projects will be increasing further with the fast development of the local economies. The EE projects are concentrated in different sectors in the two cities although they share similarities. The study will serve as a key reference for the CHUEE team and its partner organizations to reach into the markets concerned, and develop tailored financial products to meet the needs of local energy efficiency market players. CHUEE team has also launched the mapping for the cement industry in China and will launch the market research on district heating in July 2007.

The First CHUEE Loan in Western China Approved

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In April 2007, CHUEE approved a loan to fund the energy efficiency project applied by Chongqing Qinan Machinery and Electronics Manufacturing Co., Ltd. (“Qinan M&E”) in Southwestern China. Industrial Bank (IB), the CHUEE partner bank, will disburse a loan of RMB 16 million ($2.1 million) to the company to finance its new engine cylinder head and block production line. The project shows very good economic returns and environmental benefits, resulting in reduced power consumption by 36% and raw materials savings of 15%. Through recycling waste water, the manufacturing system will realize a saving of 98% in water usage as well as minimize waste water pollution. The implementation of this project will enable Qinan M&E, for the first time, to serve international leading auto manufacturers as a qualified supplier.

Visitors to PEP-China

� Visitors for Symposium on Property Law During April 8 - 23 Ms. Sevi Simarvi, Investment Officer of FIAS

Mr. Everett Wholers, Registry Officer, US

Ms. Yvonne Pang, CFS Asia Counsel, Greater China, GE Commercial Finance

Mr. Peter Rosenthal, Consultant, US

Ms. Sheldon Kaye, Consultant, US

Prof. Greg Udel, Kelley School of Business, Indiana University, US

� Visitors for WBG Workshop on Investment Climate and SME Development in Xining, Qinghai Province During April 23 - 27 Mr. Liu Xiaoyong, Chengdu SME Bureau

Mr. Xiang Shiyong, Chengdu SME Bureau

� Mr. James Weaver, Consultant, visited PEP-China on May 8 - 22 for Credit Analysis Training Workshop LYCCB/CCB Train the Trainer Workshop ZhengZhou and May 21 – 24 for Credit Workbook

� Mr. Pan Xilong, SWUFE, visited PEP-China on May 9 - 12 for Credit Analysis Training Workshop LYCCB

� Mr. Harmke Abma, Sales Manager of Uniform Agriculture BV, visited PEP-China on May 21 - 26 for Uniform-Agri Software Training

� Mr. Jos Ten Horn, the Afriesian, visited PEP-China on June 24 - 25 for Quick Scan of Current NHD Demo Farm

� Visitors for Symposium on Bank Leasing During June 11 - 13 Mr. Mehrdad Etemad, Individual Consultant

Ms. Ary Naim, Sr Financial Specialist of IFC

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Mr. Alexander Schmidecker, Leasing Specialist, Australia

Mr. Ralph Petta, ELFA, US

Mr. Igor Gruzdev, IFC, Russia

Ms. Ernst Mehrengs, Kyiv, Ukraine, IFC

� Visitors for Credit Reporting System During June 9 - 21 Mr. Tony Lythgoe, Principal Financial Specialist, IFC Australia

Mr. Walter Ripper, CEO, Insfin/Australia

Mr. Stefano M Stoppani, Financial Specialist, IFC/Italy

Mr. Marc L. Bernstein, Business Banking Director, Wells Fargo/US

Mr. William Lim, Managing Director, Singapore Credit Bureau

Mr. Narayanasamy Kokularupan, Housing Finance Consultant, IFC/Malaysia

Mr. Ad Geerts, Executive Vice President, URCB/Hangzhou

Mr. David Grafton, Head of Consumer Credit Risk Management, Commonwealth Bank/Australia

People Among Us

Mingyu Ma Operations Officer, Access to Finance

Mingyu joined the Access to Finance team of IFC PEP-China after obtaining his MBA Degree at the University of Maryland in the US. Prior to that, he had been working for the Bank of China Headquarters in Beijing and its New York Branch as in-house counsel for five years. Mingyu also holds a legal Masters Degree from the Law School of Renmin University of China. He published several papers in key financial and legal journals in the past several years in both fields. Mingyu is brought up in Inner Mongolia. His humanistic instinct encourages him to

work hard for the public good. He likes jogging, swimming and playing guitar, tennis and soccer.

Coming Up Soon

� Draft report on PSD study of “Private Sector Quality and Sustainability Standards” will be reviewed by a workshop in July in Beijing

� A workshop on middle and low income housing will be held in collaboration with the State Council’s Development Research Center in July in Beijing

� A workshop on receivables financing is scheduled for September in Nanjing

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� Business Edge program will finish an evaluation survey for its trainers by September 2007

� CHUEE Program will launch the orientation session with Bank of Beijing in August

� A study on the energy efficiency market in the cement industry will be completed by CHUEE team in August 2007.

Comments and/or questions? Contact us at:

Huan Ni (Helen)

Communications Officer

Tel: 86 28 8676 6622

Fax: 86 28 8676 7362

Email: [email protected]

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