Shanghai Pudong Development Bank (SPDB) said on Wednesday that it has signed an agreement with Silicon Valley Bank to set up a joint venture that caters to Chinese technology-based small- and medium-sized enterprises (SMEs), in a move to further strengthen the bank's leading position in SME banking services.

In a statement released to the Shanghai Stock Exchange, the partner of Citigroup Inc said that it will invest up to 500 million yuan (US$75.21 million) to hold a stake of up to 50 percent in the venture.

The deal has yet to be approved by regulators in China and the United States.

"SPDB attaches great importance to its fast-growing SME banking services. Silicon Valley Bank's expertise and experience in commercial banking for companies in the technology sector will help SPDB gain an edge over its competitors in the sector," a senior official with SPDB, who declined to be named, told China Daily.

Silicon Valley Bank, a unit of the California-based SVB Financial Group, provides commercial banking services to startups in the technology, life science, private equity and wine industries.

The bank's Shanghai office could not be immediately reached for comment on Wednesday.

SPDB's fast-growing SME banking business is among the strongest in China.

The company has set up SME banking units in all of its 34 branches after establishing a SME banking center last year to deal exclusively with the businesses.

From 2005 to 2009, the bank provided more than 3 trillion yuan in loans to more than 30,000 Chinese SMEs.

In the first 11 months of this year, the bank's loans to SMEs increased 23.45 percent year-on-year, and the number of SME clients jumped about 31 percent.

"The joint venture is also a reflection of SPDB's optimism in the growth of China's SME banking market," the official said.

As competition for bigger clients intensifies, Chinese banks are increasingly looking to SME banking for their future growth. It's a market that the banks had largely been reluctant to enter in the past due to its high risks.

In October, Agricultural Bank of China and Standard Chartered Plc agreed to set up a joint venture to provide banking services to fast-growing small- and medium businesses.

The People's Bank of China, China Merchants Bank and HSBC Holdings Plc all rolled out new products this year targeting SMEs.

A survey last year by PricewaterhouseCoopers and the China Banking Association, which polled 81 senior bankers, showed 80 percent of bankers see SME banking as a focus for the future development of their businesses.

(China Daily December 23, 2010)