China's Silicon Valley becoming Internet finance breeding ground

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China's Silicon Valley becoming Internet finance breeding ground

(Xinhua) 08:45, October 21, 2013

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Beijing is wooing Internet-based financial services such as online peer-to-peer lending and crowd financing to move their activities to its technological hub, promising perks from lower rents to cash rewards.

Beijing's Haidian District, which administers Zhongguancun, known as China's Silicon Valley, has carved out three plots for Internet-based financial service companies as part of its effort to lead the nation's innovation drive.

The municipal authorities hope more such firms will make Zhongguancun their home after the district announced on Saturday a raft of measures to create a business-friendly environment.

"Haidian District's support is just a beginning. The city will provide continuous support for the development of Internet finance," said Li Shixiang, deputy mayor of Beijing.

The district's supportive policies include streamlined administrative procedures to encourage online financial services to register and operate there.

These companies will qualify for rent discounts if they set up offices in the three designated areas, located either within or near Zhongguancun.

Also, companies deemed to be making outstanding contributions to the Internet-based financial services industry will receive cash rewards of up to 50 percent of their tax contribution to the district during the first three years of operation.

Haidian will also provide a risk-hedging fund up to 4 million yuan (656,000 U.S. dollars) for online lending companies that extend credit to small and medium-sized firms.

The initiative also encourages traditional financial institutions such as banks and funds to offer their services online and build R&D centers for Internet financial innovation in the district.

The technology hub has a history of nurturing both big and small companies with entrepreneurial infrastructure from venture capital to incubators. The area is populated by leading Chinese tech firms such as Lenovo and Founder and international ones like Intel, Microsoft and Google.

The district now boasts 566 equity investment firms and nearly 100 Internet-based financial service companies. These institutions have raised 20 billion yuan for small and medium-sized firms.

Authorities hope to take advantage of Zhongguancun's existing entrepreneurial and innovative culture and crank it up a notch to welcome financial service providers that can help channel critical capital via the Internet to cash-strapped but promising start-ups.

Internet-based financial services such as online lending have quickly risen as an alternative for small and medium-sized companies to raise much-needed capital to keep their businesses going, as Chinese banks are more inclined to lend to large and state-owned enterprises (SOEs).