Beijing and Shenzhen drive Chinese fintech: Ning Tang, Creditease

CreditEase founder and CEO Ning Tang (visual from company website)

Ning Tang, CEO and founder of Chinese fintech major Creditease, believes that the current landscape will require players in the finance sector to evolve their approach amid a highly disruptive technology landscape with substantial opportunity.

Beijing-headquartered fintech firm CreditEase specialises in inclusive finance and wealth management that explores payments, marketplace lending, crowdfunding, robo-advisor, insurance tech, blockchain and other frontiers. Its subsidiary, Yirendai is traded on the NYSE, and asked if the parent firm too would look at a listing, Tang said that the company had a 5-year plan made in 2015, which involved getting the whole firm to firm to access capital markets by 2020, without divulging additional details.

The company recently opened a new Singapore office, adding to its international offices in Hong Kong, New York, and Tel Aviv. Its domestic mainland China network covers over 40 cities, with its resources are also spread across the US West Coast, Germany, UK, and Australia.

In April, this portal had reported that New York-based developer Tishman Speyer was teaming up with CreditEase Wealth Management to invest $1.4 billion in China and other countries within the next three years. The strategic partnership is aimed to extend “global cooperation in resource sharing, fund investment, buyouts and business development,” the firms said in a joint statement. This deal also involves the companies setting up a wealth management business in the US to serve the needs of overseas Chinese.

DEALSTREETASIA recently spoke with Tang.  Edited excerpts:

What’re the origins of Creditease? 

I worked on Wall Street during the Internet bubble and I spent some time working in the TMT and financial services sector. I returned to China in 2000 and before founding Creditease I was an angel investor in early-stage companies when there was no such term as an angel investor in China. Creditease operates in two business lines – wealth management and inclusive finance, which deals with rural, urban and small business lending, and Creditease has been around for 11 years. We are a global company with offices outside of China – Hong Kong, Singapore, Israel and the US – and later this year in Silicon Valley.

What’re the assets under management and the role of the Singapore office?  

Every year we help clients deploy over $100 billion of capital and the idea of coming to Singapore in 2014 was that this city was one of the bases for our internationalisation strategy. We’ve built an investment team in Singapore focused on real estate investment and invest in leading real estate funds through a fund of funds structure. This is arguably the largest real estate fund of funds from China and also we are very interested in Singapore, given that its a regional fintech hub, which aligns with our interest in the investment opportunities in Southeast Asia.

You’ve got different entrepreneurial hubs in China – Hangzhou, Shanghai, Hong Kong, Beijing – which is the fintech capital of China? 

I’d like to say Beijing because that’s Creditease’s base. But in terms of technology innovation, not just in financial services, I think Beijing and Shenzhen are the leading cities, while some say Hangzhou as well.

I think you’ll find more fintech innovation in Beijing. But then again, fintech is a very big universe and the way we look at it is that there are two sectors being more advanced – payments and marketplace lending are both over a decade in operation and more than $1 trillion in size. They both have regulatory frameworks in place and representative companies with global leadership like Tencent and Alibaba. You have the payment businesses of Tencent and Alibaba and Creditease’s own business, Yirendai. So they are more advanced sectors but we can also discuss robo-advisors for the middle class – the mass affluence – to do asset allocation and also talk about crowdfunding for angel investors and startup companies to find each other. You have also insurance tech, which can do a lot for the insurance industry, regtech, blockchain and so on. All these sectors are promising in my view and I guess you find more such companies in Beijing than anywhere else in China.

Why not Shanghai, which is the financial centre? Why are these concentrating in Beijing?

My sense is that traditionally, there is Zhongguancun, which is China’s Silicon Valley. And this is where you find more tech talents from institutions like Tsinghua University and Peking University. For example, among the first batch of Nasdaq-listed companies from China, there are three from Beijing. Yirendai by Netease is an example of that.

Why do so many Chinese firms want to list in New York when Chinese entrepreneurs have access to very liquid stock markets in cities like Shanghai, Shenzhen and Hong Kong? 

In our experience, the US capital markets are more advanced in terms of welcoming innovative business models and companies at the growth stage despite being a pre-profit stock.

For Chinese capital markets, the first batch of companies getting listed is from traditional industries so these are existing businesses with strong profitability. But for new enterprises with new business models that show money-losing financial statements…these cannot get listed easily in China. In Yirendai’s case, that was a strategic decision to list the company outside China and go through the most rigorous due diligence.

And the US market at the time was more knowledgeable about marketplace lending because Lending Club had been listed. And we also wanted to work with institutional investors in New York who can appreciate our innovative achievements.

You’ve listed Yirendai in New York. Will its parent firm, Creditease, be looking at an IPO in the next few years?

We have this 5-year plan made in 2015 that the whole company will access capital markets by 2020. So far, we have no detailed plans on which stock exchange this might be.

Recently, Beijing has been implementing capital controls and kerbing capital outflows from China. How has this affected Creditease’s business?  

We’re largely unaffected by these controls, as many of our wealth management clients have assets outside of China, and we help them manage those. However, with our Creditease Fintech Investment Fund,  we had some of our partners who were able to invest overseas. Right now, they don’t invest as much but that’s kind of manageable. We work with Goldman Sachs, American Express and HSBC so we get to experience different opportunities in the markets we have a presence.

Looking at Southeast Asia, you’ve got a microfinance background gained from working with Grameen Bank in Bangladesh. Given this experience, how do you see things playing out in other emerging markets like Indonesia and the Philippines?

I think that personally, I feel emotionally attached to this region and my experience in Bangladesh planted the seed. It was eye opening and inspirational! But I can’t say that I’m very knowledgeable about the markets you just mentioned.

And without a good market study, there’s no way to have a view on how we can potentially access those markets. But we can access a market in many different ways. For accessing a market operationally we can set up a team, like with what we’ve done in Singapore.

We can also invest into leading companies in that market; last year our credit fund purchased loan assets from a US marketplace lender. We can do that with Southeast Asian marketplace lenders for instance. There are many ways to access a market and we’ll do that based on thorough research and we’re very interested in Southeast Asia.

There’s been a lot of movement in the Bitcoin and Ethereum markets. What’s the view of Creditease on digital currencies as an asset class and its use in marketplace lending? 

We remain interested but it’s too early at this stage. The regulatory framework and security issues around such models…I think we’d like to see more things get worked out before this asset class becomes appealing to our investor base. We help our investors do asset allocation and any asset class going into the portfolio should be a major asset class. Otherwise, it’s quite speculative and not helpful to our investors

China is reportedly working on developing its own digital currency. How would it impact the online financial space in China? 

This effort is part of a broader movement by regulators looking to encourage fintech in China. Recently, the Chinese central bank set up a fintech committee to study fintech and that’s very encouraging.

The relationship between the regulators and innovators can be win-win. It does not need to be the case that regulations harm and inhibit innovation and can be quite the opposite. The two sides can work together well. So China is leading in the world of fintech in many aspects and the key reason is that the two parties have worked well together.

A lof of banks and other financial institutions are launching corporate incubators, accelerators and innovation labs. Does Creditease plan to adopt a similar model to tap innovation?

I believe that we are an innovative organisation. We sponsor a lot of ideas and our team members can innovate within the innovation framework that we have. And I think that it’s not that we lack innovation momentum or resources. We have strong innovation momentum; when blockchain first came, our different groups started to research and use it in what they do, and the results have been encouraging.

Technology itself is not the key; it’s about having great consumer and business insights. Based on customer needs, we look around for available technologies and utilise them very well to make the business model really work for that customer need we want to fulfil.

That’s the logic, as opposed to doing technology for technology’s sake. I don’t think that’s the best way to approach it.

Looking at the future of fintech in China, you have Beijing where the regulators are based. With all these centres like Shenzhen, Hangzhou, Beijing, Shanghai and Hong Kong, what is the future of all these different ecosystems? 

Quite interestingly, you’re talking about cities. I’m thinking about nations. Singapore is talking about being a fintech hub and the UK has done a good job of promoting fintech. When the finance minister of Switzerland visited China a few weeks back, I was the fintech representative for China and the Swiss delegation was talking about how they’d like to become competitive in fintech development.

I think that each city, nation and organisation…we have to assess what’s our unique strengths. Shanghai has more foreign financial institutions and talents in that regard while Beijing has the regulators sitting there and the technology companies. And with Shenzhen, you have it close to Hong Kong and so on.

So different cities and nations have to assess the unique attributes they work and work on refining and enhancing those. I’m quite hopeful that Beijing will continue to be the fintech hub and with Creditease, we’ve got a presence in various places like Israel, Singapore, New York and Hong Kong, so we can access this innovation everywhere!

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