-Landmark Cooperation Deal with Finance House--
WASHINGTON, D.C., May 8--The International Finance Corporation (IFC) will invest up to US$30 million in Orient Finance Company (OFC), a pioneering non-state sector finance house in China. This is IFC's first financing to a Chinese enterprise that is sponsored and fully owned by indigenous private entrepreneurs, the Orient Group. OFC is also the first Chinese non-state financial institution to raise offshore financing, entirely relying on its own credit standing without any explicit or implicit government guarantee.
IFC's financing will help OFC expand its operations and extend long-term loans to local non-state enterprises in the less developed northeastern region of China where OFC is based. It will target export-oriented small and medium-sized firms and town-and-village enterprises. In addition, IFC will organize and arrange technical assistance to strengthen OFC's institution building, including internal controls, credit operations, project appraisal, review procedures and risk management. IFC's involvement will help OFC access international and domestic sources of funding without state backing or government guarantees.
IFC Vice President Mr. Jemal-ud-din Kassum said, "We are very pleased to be associated with a project that supports China's ongoing economic reform process and enables IFC to make a meaningful contribution to the development of financial markets in the country by helping to strengthen a new, commercially-oriented, non-state financial institution."
Mr. Kassum added, "The establishment of non-state- owned financial intermediaries, such as OFC, marks an important turning point for the financial sector in China, which has been exclusively in the public sector domain. It reflects the importance attached -- by the authorities -- to promoting a modern and competitive banking system that supports an increasingly free market and an emerging non-state sector."
IFC's financing consists of a loan of up to US$10 million for its own account and a second loan of up to US$20 million for the account of participants.
The Orient Group is a conglomerate consisting of 40 enterprises in China (mainly in the northeastern Heilongjiang Province) as well as overseas. The group was formed in 1978 by private individuals and is now one of the largest non-state owned industrial groups in China.
IFC, a member of the World Bank Group, is the largest multilateral source of equity and loan financing for non-state sector projects in developing countries. So far, IFC has financed 19 projects in China worth a total of $1.9 billion, including $318 million for IFC's account.
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