Total Alternative Finance Volume China

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Dianrong, the large Chinese fintech which offers a plethora of services, is planning to IPO in Hong Kong as soon as 2018 with the aim of raising a minimum of $500 million, according to people familiar with the matter interviewed by The Wall Street Journal.

If true, Dianrong’s joining a growing string of Chinese tech behemoths choosing to list in the city rather than on mainland exchanges. These include insurtech Zhong An and alt lender Lufax.

There are several reasons why mainland fintechs are opting for Hong Kong listings:

  • They’re buying into Hong Kong’s efforts to lure fintechs and build up its hub status. Initiatives toward this end include a campaign by InvestHK, the government department that looks to attract foreign direct investment to the city, to persuadeestablished overseas fintechs to expand to Hong Kong, and the Hong Kong Exchanges and Clearing Limited’s (HKEX) plans to launch HKEX Private Market in 2018, a “nursery” for early stage companies that are not yet ready to go public. These efforts are the result of Hong Kong still needing to build a reputation for fintech, while the mainland, which has seen a rapid proliferation of fintech, turns its attention to other matters like regulation.
  • Hong Kong is more open to interaction with international markets than the mainland. The territory’s established financial services industry, with 157 banks and over 600 stock brokers, provides a large market for fintechs looking to expand internationally through a network of global connections. Additionally, Hong Kong offers an attractive environment for domestic fintechs, as both its financial services industry and its stock exchanges have more frequent interaction with Western markets, and hence bigger investors and wider distribution. This promises more attention from Western audiences, making Hong Kong’s exchanges an appealing option for Chinese fintechs.
  • There’s a precedent of successful Hong Kong IPOs for Chinese players. Zhong An, China’s biggest online insurer, saw immediate success when it listed in Hong Kong in September: Its IPO was priced at $1.5 billion, making it the second-largest fintech IPO in the city to date, and the company saw its shares jump dramatically above its listing price. The IPO also attracted major investors, with Japanese tech giant SoftBank agreeing to buy 5% of its shares for $550 million. This precedent of success is likely to have put the wind in the sails of other mainland fintechs pondering exits.

The exodus to Hong Kong suggests that, while China is good at producing successful companies, it’s worse at nurturing them to maturity. Hong Kong and the Chinese mainland have diametrically opposed problems when it comes to fintech: China’s fintech industry, at least in part due to a vast addressable market and years of unchecked growth, has boomed and thrown up governance problems, causing the country’s regulators to react by adopting a better-safe-than-sorry stance toward innovation.

Hong Kong, on the other hand, is still trying to assert itself as a fintech hub in the region, and as such, is probably making it much easier for companies to operate. Given that China’s cautious stance toward uncontrolled disruption in its financial system looks unlikely to abate anytime soon, and that Hong Kong will be striving to attain fintech hub leadership for some time, it’s probable that mainland companies will keep choosing the latter for their IPOs for the foreseeable future.

Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider’s premium research service, has put together a report that compiles various fintech snapshots, which together highlight the global spread of fintech, and show where governments and regulatory bodies are shaping the development of national fintech industries. Each provides an overview of the fintech industry in a particular country or state in Asia or Europe, and details what is contributing to, or hindering its further development. We also include notable fintechs in each geography, and discuss what the opportunities or challenges are for that particular domestic industry.

In full, the report:

  • Explores the fintech industry in six countries or states, and identifies individual fintech hubs.
  • Highlights successful fintechs in each region.
  • Outlines the challenges and opportunities each country or state faces. 
  • Gives insight into the future of the global fintech industry. 

Interested in getting the full report? Here are two ways to access it:

  1. Subscribe to an All-Access pass to BI Intelligence and gain immediate access to this report and over 100 other expertly researched reports. As an added bonus, you’ll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now
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