Silicon Valley Bank’s collapse has posed an issue for Chinese funds and tech start-ups using the bank as a funding bridge for groups operating between China and the United States.
According to the Financial Times, SVB’s sudden takeover by the US banking regulators on Friday left executives in China with little time to get their money back, with many now saying that their funds are tied up.
The Silicon Valley-based lender served a key role in China’s dollar-based ecosystem for funding start-up companies, industry insiders told the outlet, with these companies and funds often holding their money at SVB as an intermediary before bringing it to China.
"We tried Friday morning, but it was already too late. The transfer is still processing," the founder of a Beijing-based tech company with about $10mn currently in limbo told the Financial Times. "It’s very crazy, we didn’t think this could happen."
The anonymous founder hopes that a large American bank would take over SVB’s US assets. The founder noted that since half of their capital was held at a separate bank onshore in yuan they didn’t foresee any payment issues in the near future.
Several China-based venture capital firms told the outlet that some start-ups faced similar issues of not being able to access their SVB-based funds outside of China.
More than a dozen tech and life sciences companies trading in Hong Kong listed SVB as one of their primary banks.
Cancer treatment developer Zai Lab, with offices based in Shanghai and San Francisco, is one of these groups.
"The company on Saturday said it had an 'immaterial' $23mn exposure to SVB, with about 2.3 percent of its cash and cash equivalents held at the bank at the end of 2022," the Financial Times reported.
SVB’s collapse also poses issues for the company’s joint venture in China with Shanghai Pudong Development Bank, in which the US bank holds a 50 percent stake.
Over the weekend, the Shanghai bank of China’s banking regulator held an emergency meeting over SVB’s collapse. Chinese commercial banking regulations indicate that the company may no longer be able to be a major shareholder of the venture, according to the Financial Times.
One scenario could see SPDB take over SVB’s stake, "but it really depends on how SPDB thinks about the prospect of the venture and whether it can keep another commercial banking license in this regulatory environment," one person familiar with the meeting told the Financial Times.
"The joint venture, set up in 2012, reported an Rmb5.5mn loss on revenue of Rmb195mn in the first half of 2022," the outlet reported
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