A Record on CCB’s Initiatives to Support the Building of a New Countryside

Reclaiming the Land of Hope

- A Record on CCB’s Initiatives to Support the Building of a New Countryside

Premier Wen Jiabao stressed in the Report on the Work of the Government (2006) that the second major task of the government is “to accelerate the development of modern agriculture and promote the building of a new countryside”. The building of the new countryside will stimulate the financial needs of the countryside from various aspects and present a wide arena for the expansion and development of the banking business. In recent years, CCB, with the mission of “facilitating modern lives”, has focused its efforts on supporting the intensive agricultural production, the flow of agricultural produce and the deep processing of produce and by-products, and increased the credit inputs in the initiatives of supporting the building of the new socialist countryside. By the end of 2006, the balance of CCB’s loans to the countryside reached RMB33,317 million, leaving a deep imprint on the history of building the new countryside.

 “Marriage” with the Modern Agriculture

In the initiatives of supporting the building of the new socialist countryside, CCB believes that the financial service should enable the farmers to transform from the self-supplying individual producers to the operators and producers of modern agriculture featuring corporate, large-scale, and intensive operation  in order to achieve the sustainable and harmonious growth of the agriculture and the countryside,

To this end, CCB took the initiative to form the “bonds of marriage” with the farmers and offered them customized quality services to support the large-scale modern agriculture, promote the healthy growth of the rural enterprises, encourage the spread and utilization of modern agricultural products and technologies, and drive the transformation of villages in the process of building the new countryside.

The production and construction corps in Xinjiang and large-scale agricultural bases in Heilongjiang are the “aircraft carriers” of the modern agriculture and the pioneering forces leading and driving the modernization of the countryside neighboring them. For many years, CCB has delivered them urgently-needed credit services and committed itself fully to the development of these enterprises.

It is reported that CCB, in light of the characteristics of agricultural production of the corps, Xinjiang Branch will visit the production and construction corps voluntarily and extends loans to them every February and March - the busiest months for the purchase of agricultural production materials in a bid to meet their capital needs for purchasing the materials for the planting of cotton and other crops. A leader of the corps once said, “CCB’s service is just like the timely rain. They know everything we want.”

The regions neighboring the production and construction corps are located remotely and have no sufficient infrastructure. The corps knew this. They wished to do something, but they could do nothing about it. Having seen such situation, CCB Xinjiang Branch extended RMB100 million to support the construction of small towns and counties neighboring the corps in combination with the corps’ efforts to reconstruct the old and dangerous houses. With these efforts, the housing conditions of the corps’ staffs and the infrastructure of the neighboring towns and counties were improved and the urbanization process was accelerated.

In the meantime, in light of the needs of the corps for diversified services, CCB developed buyer’s credit for account receivable, such as buyer credit for Tianye Water Saving Irrigation System, buyer credit for Tianfu Thermoelectric Company, close-end loans, integrated loan, and circular quota loan. Top priorities were given to the strong enterprises in such areas as the water saving and irrigation and the deep processing of agricultural produce and by-products. In the past 6 years, CCB extended a total of RMB25.8 billion to the production and construction corps. Last year alone, CCB extended RMB-6,383-million loans to support planting, food processing, brewing, textile, construction, chemical production, cement, deep processing of fruits and vegetables, and purchase of agricultural materials. CCB ranked among the top banks in terms of the year-on-year growth of loans extended to the corps.

CCB’s financial services are widely acclaimed by Beidahuang Group. To support the intensive production and operation of Beidahuang Group, CCB extended a line of credit of RMB4,067 million to the Group. CCB extended a total of RMB-4.4-billion loans to large-scale enterprises processing produce and by-products, such as Heilongjiang Jiusan Oil & Fat Co. Ltd. (JOFC), Harbin Longken Malts Co. Ltd., Heilongjiang Beidahuang Rice Co., Ltd., and Heilongjiang Wondersun Dairy Co., Ltd.. CCB provided a total of RMB-1.5-billion working capital loans for trade companies such as PetroChina & NK Fuels Co., Ltd. and Heilongjiang Nongken Beidahuang Commerce and Trade Co., Ltd.. CCB also served the agent of Beidahuang Group for the import of large-scale farming machines and offered international services such as letter of credit and overseas payment. The Group raised RMB330 million in the IPO and CCB Heilongjiang Branch offered exclusive settlement service during the IPO, showing that CCB has the ability to offer all-round banking services.

In the early days of the People’s Republic of China, there was a well-known brand throughout China – Dongfanghong Tractor manufactured by Luoyang No.1 Tractor Factory, the first Chinese tractor factory. CCB’s employees carried their backpacks and were stationed in the factory from the very beginning of the construction of the factory in 1955. They worked together with the engineering workers and offered the factory credit services. Up till now, CCB and Luoyang No. 1 Tractor Factory have always maintained sound cooperation. In the process of serving the building of the new countryside, CCB has always supported major construction projects and the production and operation of the Factory and offered financial consulting services to help it to adjust the product structure and strengthen the development of new projects and products urgently needed by the modern agriculture. Since 2000, CCB has extended RMB170 million capital assets loans to support the development of diesel engines by the Factory. With CCB’s support, Luoyang No.1 Tractor Factory captured 70% of the non-road-use diesel engine market. To reduce the financial cost of the Factory, CCB assisted the Factory in applying for debt-for-stock conversion and issued banker’s acceptance bills in place of working capital loans. In 2006 alone, CCB handled a total of RMB60 million 50% deposit banker’s acceptance bill, saving RMB-1.5-million financial cost for the Factory. To support the Large-Wheel Tractor project of the Factory, CCB lowered the lending rate by 2% based upon the benchmark rate, saving a total of RMB-1,592,300 interest payment for the company for 6 years. To respond to the structural adjustment of the Factory, CCB accordingly adjusted the credit structure and focused the limited credit resources upon the large-scale and major projects that need the capitals most. In 2006 alone, CCB extended RMB-384-million loans to the Factory, among which RMB-194-million capital assets loans were extended to support the Large-Wheel Tractor project. When completed, the project will generate a new addition of RMB1,650 million sale revenues and RMB113 million taxes. Up to day, Luoyang No. 1 Tractor Factory has manufactured a total of 1.4 million tractors, which were sold across China and exported to 92 countries and regions. The Factory has made great contributions to the agricultural development of China.

To “Support” Township and Village Enterprises (TVE)

In the NPC and CPPCC sessions, when the reporters asked Guo Shuqing, member of the CPPCC and Chairman of CCB, about what CCB has done in the building of the new countryside, he answered, “So long as we can find out proper means or platforms, we will offer our strong support to the countryside, whether it is the infrastructure project in rural areas, the agricultural project with economy of scale, or the investment or consumption loan needed by farmers.” There was a consensus by the decision-makers of CCB on the building of the new countryside – the key lies in the increase of farmers’ incomes and the foundation for realizing that goal is the development of TVEs.

To this purpose, CCB expanded financial services to support the intensive operation of villages by firstly starting from supporting the construction of TVEs and infrastructure  in rural areas and offering public financial services to villages. In regions where the county-level economy is relatively developed, the corporate customer structure has witnessed obvious changes. TVEs accounted for half of CCB’s corporate customers.

Changzhou region is one of the birth places of “Sunan Model” (Sunan represents the South of Jiangsu) for the development of TVEs. In recent years, the TVEs need to grow through restructuring and another round of pioneering efforts due to the ambiguous ownership, similar industrial structure and low technological contents of TVEs. In this whole process, CCB employees visited the enterprises and helped them to overcome difficulties. CCB dispatched teams consisting of experienced customer managers to accompany the relevant enterprises to study the markets in Beijing, Guangdong, Shanghai, Xi’an and other regions and seek business opportunities there. With the help of CCB, one TVE in Wujin, Changzhou imported a new assembly line, which generated an output of RMB150 million that year. The head of the enterprise said passionately, “With such a good partner as CCB, we have to run the TVE well and make our fellow farmers get rich.”

The SMEs in Zhejiang was borne from former TVEs. They are different groups of small enterprises and belong to different industry communities. One village has one product, and one county has one industry. These enterprises require fast and frequent short-term loans. To meet their demands, CCB developed personalized service processes and solutions, which evaluate the credit rating of SMEs from their basic strength, economic strength, repayment ability, profit-making ability and development potentials, and treat the enterprises differently. The priority is given to the advantageous industries and enterprises. CCB opened five “green channels” for education industry, listed companies, hospitals, high-grade roads and real estate respectively to improve the efficiency of serving these clients. In terms of product innovation, CCB offered sales settlement network service for province-wide medium-sized enterprises, provided mortgaged loans and buyer’s credit services for merchants, and opened export tax rebate account trust loans and online banking corporate customer service system. According to the statistics of CCB, among the 1677 VIP customers in Zhejiang Province, there are over 1000 medium-sized TVEs and there are over 500 customer managers serving these enterprises. With the strong support from CCB, the TVEs in Zhejiang achieved substantial growth. At present TVEs have established 275 province-level famous brands, accounting for 70% of the total famous brands of industrial products in Zhejiang Province.

The mountainous region in the west of Fujian belongs to the economically underdeveloped region. The insufficient demands of industrial and mining TVEs for effective loans were big constraint hindering the sustainable development of local economy. The local branches, guided by the government’s strategy of promoting the industrialization of agriculture, selected the TVEs with bright prospects as the marketing targets to generate growth. An aquaculture TVE could not find any loan when it was established. Having conducted comprehensive evaluation, CCB made a resolute decision of extending RMB5 million to the enterprise. Later CCB signed a comprehensive cooperation agreement with the enterprise and extended more loans to it. Up to now, CCB has extended a total of RMB91.80 million to the enterprise and handled RMB31.13 million banker’s acceptance bills. With CCB’s support, it witnessed healthy and sustainable growth. Today, it is listed among the 15 leading pioneering enterprises in agricultural industrialization in Zhejiang Province and key national projects for the comprehensive development and diversified operation of agriculture.

There are some large-scale agricultural materials TVEs in Tieling, Liaoning Province. Dadi Materials Co., Ltd. is a typical representative of these enterprises. The farming vehicles sold by them were very popular among local farmers. However, these vehicles were not sold well for the farmers had no sufficient capitals. Having realized the situation through the market surveys, CCB visited the enterprises and farmers to seek for their opinions and launched the personal auto consumption loan with the farming vehicles as the main form. As of the end of 2006, the local CCB branch extended a total of RMB840 million personal auto consumption loans to farmers over the past 7 years, ranking No. 2 in the industry in terms of the accumulative amount of loans. With the help of the loans, farmers purchased over 8580 faming vehicles. There are over 70 households in Gu Village, Kaiyuan Town, Tieling. The village was poor. With the help of CCB’s loans, over 20 households got rich by purchasing the farming vehicles. 

There is a TVE engaged in the construction industry in Naxi Autonomous County, Lijiang City, Yunnan Province. It is the largest TVE in Naxi. However, the enterprise lost the source of materials and encountered difficulties in operation due to the implementation of the 'National Natural Forest Protection Project. Having known the difficulties faced by it, CCB was also very concerned. Having learned that the local government was going to intensify the input in tourism, CCB went directly to the local government and built up a bridge between the local government and the enterprise. The enterprise finally won the “Seven-Star Tourism Street” project combining tourism, shopping and dining. CCB also sent out customer managers to offer financial consulting services including project consulting and calculation of returns. Furthermore, CCB provided credit support and project fund management services for the enterprise. These efforts have not only rescued the former loans, but also driven the fast growth of the enterprise. Today, it has not only paid up the former loans, but also recovered the new loans.

In addition to transfusing blood to TVEs, CCB also attaches great importance to helping TVEs form blood. There are numerous cases of how CCB supports the development of TVEs