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A stronger link

By Cong Mu (Global Times)

08:52, August 27, 2012

As credit has become tighter over the last year, a new method of providing less risky assistance to small firms has emerged: supply chain financing.

Jim Yeh, 45, a former bond trader with Credit Suisse, built a supply chain financing platform for Foxconn Technology Group last year, to help its myriad Chinese suppliers get funding more efficiently.

"A huge company like Foxconn has over 200 subsidiaries [which operate separately]. In truth, no one is able to tell exactly how many orders the subsidiaries have placed [with suppliers] without the supply chain financing center," Yeh told the Global Times.

Since a supplier may get orders from multiple Foxconn units, if a bank that is considering lending to the supplier asks one of the units if the supplier has 30 million yuan ($4.7 million) worth of orders, the unit may reply that it is only aware of 3 million yuan of orders, Yeh explained.

"Then the bank would drop the idea," he said.

The financing platform Yeh built can scan across Foxconn's system and check if several Foxconn subsidiaries have, in total, placed 30 million yuan worth of orders with the vendor.

"[If verified], then the supplier can get 20 million yuan in bank loans instead of just 1 or 2 million," said Yeh, who is also the chief advisor on supply chain financing at Shanghai Advanced Institute of Finance at Shanghai Jiao Tong University.

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