Lenders try to give boost to culture

Updated: 2011-10-19 07:05

By Wang Xiaotian (China Daily)

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BEIJING / HANGZHOU - Commercial lenders in China are taking a look at television stations, publishing houses and other cultural enterprises in the hope of taking advantage of opportunities that are likely to come from those industries, which the central government has vowed to support.

From the beginning of 2009 to the end of August, the value of the Bank of China's outstanding loans to cultural industries increased by 55 percent, going up to 25 billion yuan ($3.9 billion), said Yang Wei, senior manager of the bank's corporate banking unit.

"Cultural credit is a brand new area for banks and combines both opportunities and difficulties," Yang said. "We highly value the business opportunities lying ahead for cultural industries."

The bank also joined the Ministry of Finance to start the first State-level investment fund for the cultural industry in July. The fund contains 20 billion yuan.

Bank of Beijing, meanwhile, has lent more than 27 billion yuan to cultural institutions since 2007. In the past three years, the value of those loans has increased by more than 300 percent, said Liu Hong, a spokeswoman at the company.

To make such lending easier, commercial lenders also have adopted a flexible collateral policy for cultural industries. For example, some allow companies to obtain loans by putting up copyrights or money owed by their clients as collateral.

The cultural industry was cited by the Central Economic Work Conference of the Chinese government at the end of this past year as an industry that should be developed during the period of the 12th Five-Year Plan (2011-2015). It was also the theme of the latest plenary meeting of the Communist Party of China Central Committee, which concluded on Tuesday.

According to figures from the central bank, 27.6 billion yuan in new loans were made to cultural industries in 2010, which was up by 61.6 percent from the previous year, marking the fastest increase seen for such lending in the country's history.

"Financial support from banks is definitely important to cultural companies like us," said Xu Wencai, vice-president of the Zhejiang-based film and TV giant Hengdian Group Holdings.

"If a cultural company only wants to maintain its operations, of course there will not be huge demands for external capital. But once it decides to develop quicker, its demands for financing will increase."

"Currently, most cultural companies still operate on their own money. But as banks constantly explore means of lending that are more suitable to cultural industries, credit will play an increasingly important role," said Xu Rong, a division director at the Ministry of Culture's department of cultural industries.

"The proportion of lending to the cultural industry to the total amount credit (available) is far less than the piece of total GDP cultural industries had during the same period, which was 3 percent," Yang said.

He said certain cultural sub-industries receive more support from financial institutions than others.

"For example, even for Bank of China, a leading lender in this regard, nearly 32 percent of its lending went to crafts and other manufacturing and only 2.4 percent to entertainment businesses," Yang said.

He called for third-party evaluations of intellectual-property rights and artwork, and for insurance and underwriting to be used to ensure that loans are more evenly distributed.

A report from the China Banking Regulatory Commission's Zhejiang branch said lenders still face obstacles to giving cultural industries support. Those include the small scale of many of those companies and their lack of sufficient collateral.

"And judging by the current situation, most of the lending went to traditional cultural industries in broadcast, film and television, publication and leisure, while emerging business in cartoons, advertising, and digital media didn't get much support," it said.

In addition, the use of copyrights as collateral may lead to an increase in the number of non-performing loans, said Xu Guojun, chief financial officer at the Great Wall Film & TV Co Ltd.

"If companies cannot repay debt, a bank cannot make use of the copyright by itself," he said. "A copyright will be useless for lenders."

"And the value of a copyright will be diluted gradually," said Wu Xiaoxia, head of Bank of China's Dongyang branch in Zhejiang province.