Sep 19, 2019 03:02 AM

China Approves Private Bank Backed by Wuxi Companies

Jiangsu Hongdou Group obtained regulatory approval to establish Wuxi Xishang Bank. Photo: VCG
Jiangsu Hongdou Group obtained regulatory approval to establish Wuxi Xishang Bank. Photo: VCG

China’s banking regulator cleared the creation of a second private bank this year after a two-year hiatus on approvals, bringing the total number of private banks in the country to 19.

Jiangsu Hongdou Industry Co. Ltd., a men’s apparel maker, said Tuesday that it obtained regulatory approval to establish Wuxi Xishang Bank. Hongdou and a second major backer of the bank, petrochemical company Jiangyin Chengxing Industrial Group Co. Ltd., are leading private companies in Wuxi, a city near Shanghai in eastern China.

Xishang Bank is the second private bank approved this year after no approvals in the two years since Meizhou Keshang Bank got a green light at the end of 2016. In a notice issued at the beginning of this year, the China Banking and Insurance Regulatory Commission said it would stick with the principle of “setting up another after one is mature” in approving the establishment of private banks.

Although the pilot period for private banks has ended, the banking regulator seems to be maintaining a relatively cautious approach to approving new banks, said Zeng Gang, deputy director of the National Laboratory for Finance and Development. Not every application will win approval, and clearance will depend more on the conditions of each applicant, such as whether development plans have differentiated features, while not deviating from the principle of supporting small and micro private enterprises, Zeng said.

Xishang Bank has a proposed registered capital of 2 billion yuan ($282 million), of which Hongdou Industry will invest 100 million yuan in exchange for a 5% stake, and its parent company Hongdou Group will invest 500 million yuan for a 25% stake, the company said in a statement.

Chengxing Industrial Group will be the second-largest shareholder of the bank with 24%. Other investors, holding less than 10% each, include Nanjing Dele Science and Technology Co. Ltd., a mobile communication service provider; Xingda Investment Group Co. Ltd.; Suzhou Kelida Building & Decoration Co., an architectural and engineering services company; Jiangsu Shuangxiang Group Co. Ltd., a rubber plastics machinery manufacturer; and World Sensing Net (Wuxi) Co. Ltd., an Internet of Things company.

According an equity subscription agreement reached in January, all investors agreed to no distribution of profits during the first five years. They also promised not to transfer their holdings in the bank for five years.

China’s private banks fall mostly into two categories. One type is local traditional banks, basically a smaller version of city commercial banks. They usually rely on local resources and provide support to local businesses.

The other type is online-only banks, usually backed by internet companies and big investors. Among the 19 private banks, three are online-only: Tencent-backed WeBank, Alibaba-backed MYbank and Sichuan XW Bank, backed by smartphone-maker Xiaomi. They are also the largest private banks based on assets.

Contact reporter Denise Jia (

You've accessed an article available only to subscribers
Share this article
Open WeChat and scan the QR code