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At JFP Holdings, we are working with Chinese and international private equity and venture capital firms, commercial banks, leasing and insurance companies to take advantage of the new trends in China’s financial services industry.
China’s privately owned companies, as compared to its state-owned enterprises, account for the majority of the country’s GDP, employment, exports and innovation. Privately owned companies are 8 to 10 times more efficient in job creation than China’s large companies, and 4 to 6 times more efficient in generating GDP. Yet, China’s state-owned enterprises receive the major portion of the large amount of capital that now exists in the country. China’s savings rate of 50% is among the highest in the world, with an estimated $23 trillion parked in the country’s banks.
China’s biggest problem is the lack of development of its capital markets. On the flip side, its biggest opportunity is the development of capital markets that can channel much needed capital to the companies and individuals that can use it best. In terms of its capital markets, China is now where the U.S. was in 1980—when the stock market was poised to triple during the decade, creating a range of equity financing alternatives for companies of all sizes, and mezzanine securities were being developed to help medium sized companies gain access to new debt sources. Just as the U.S. capital markets did in the 1980s, China’s capital markets are developing, providing Chinese companies with an increasingly wider variety of financing options.
The development of China’s capital markets over the next 10 years will fuel a new round of growth, innovation and wealth accumulation in the country and will create a myriad of opportunities in the financial sector.
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