Chinese banks demand tougher regulation of non-financial institutions

Ask government to draft rules to head off higher risk.

Bank of China Ltd, one of China’s Big Four banks, said banks are facing rising competition from e-commerce and logistics companies in providing trade financing services. Risks, however, are also piling up.

Trade finance refers to financing trading transactions, including trade credit and insurance guarantees. Around 80% to 90% of world trade relies on these services, mostly of a short-term nature.

Shanghai Pudong Development Bank said the trade finance business is of great significance to banks as it creates low-cost liabilities and extends other revenue opportunities.

“The development target and risk management standards of non-financing companies are quite different from those of banks. Therefore regulators should enhance supervision of such trade financing activities,” said Chen Siqing, a BOC Vice President.

Among these non-financial institutions are e-commerce companies that are now into the financing business such as Alibaba Group Holding Ltd, China's biggest e-commerce company. Alibaba has provided nearly US$4.8 billion in credit to 130,000 trading enterprises since it launched its lending business in 2010.

Chen said these non-financial companies are accelerating their financial services based on their information and technological advantages, and strong electronic trading or logistics distribution platforms