38786 Volume 33, 1 October ­ 31 December 2006 Recent Business Highlights PEP-China Partners' Meeting Held in Chengdu on December 7 International Symposium on Small Business Lending in Hefei MFI Pilots in Inner Mongolia and Sichuan Approved by the Authorities PEP-China Helped to Put Financial Institution Insolvency Framework on the Policy Agenda Credit Training Successfully Delivered to Xi'an CCB Property Law Approved by NPC Standing Committee Sichuan Environmental Compliance Project Completed North Andre Linkages Program Starts Implementation Mid-term Review of China Development Marketplace Program Concluded CHUEE Provides Training to Partners Business Edge Management Training Program Expanded in 2006 Newly Developed Training Courses for SMEs Sichuan Value Chain Studies (Pork and Electronics) Findings Echoed by Municipality Visitors to PEP-China Mr. Mark Nielsen, Mr. Alexander Nicholas Wellsteed, Mr. Markku Kavonius, Mr. Ian Crosby, Mr. Robert Whyte, Mr. Jaouad Berrada, Mr. Ronaldo Feyria, Ms. Mary Miller, Mr. James Weaver, Mr. Modibo Camara, Mr. Gokhan Akinci, Ms. Xiaolun Sun, Mr. Larry Yu, Mr. Xingbin Wang, Ms. Ann Bishop, Mr. Michael Wild, Ms. Monica Chong, Ms. Kimberly Shires, Mr. Byron Lee, and Mr. Felix Lippert People Among Us Wang Hengfu, Operations Officer, Access to Finance Coming Up Soon Final due diligence by four investors on Nanchong MFI will be conducted in the last week of February 2007. TA Steering Committee meeting for the United Rural Cooperative Bank is scheduled for March 2007. CHUEE first energy efficiency loan is to be disbursed in January 2007. A multi-year China Corporate Social Responsibility Program is being formulated by CES and PEP-China The Dairy Linkage program to publish a dairy guidebook for farmers in Sichuan and Yunnan in spring 2007. Page 1 of 9 Recent Business Highlights PEP-China Partners' Meeting Held in Chengdu on December 7 The annual PEP-China Partners' Meeting was held on December 7, 2006 in Chengdu. It was attended by Holger Grundel, PSD Advisor from DFID, Peter Jensen, Counsellor and Kieran Gorman-Best, Senior Program Officer from AusAID, and Warrick Smith, Senior Manager for Advisory Services in IFC East Asia. The meeting reviewed operations of PEP- China during the period from July 1 2005 to September 30 2006, and action plan for the remainder of FY07 and medium term future. Partners were generally very pleased with the operations of PEP-China and the results achieved so far. They also expressed support for the general mix of activities, regional focus, and level of intervention. A number of important recommendations were made for future programming and reporting, such as assessing results and impacts against M&E targets and more fully reflecting activities of other donors and stakeholders in planning and executing programs. Engaging in new activities could be selectively considered, but only if there was strong demand from local counterparts, a clear exit strategy, capacity to deliver high-quality services, and impact on poverty reduction and Western region development. (News contributed by the General Manager's Office) Access to Finance International Symposium on Small Business Lending in Hefei PEP-China and the China Banking Regulatory Commission (CBRC) jointly sponsored a national symposium on lending to small business in Hefei, Anhui Province on October 25-27, 2006. The Symposium aimed to disseminate international best practice in small business lending to local banks and credit cooperatives. Around 280 participants from 120 financial institutions attended this symposium, co-supported by the Shanghai International Banking and Finance Institute (SIBFI). In addition to speaking on several subjects, PEP-China distributed an evaluation guide on SME banking to the Page 2 of 9 participants, which was later used by CBRC in their other meetings. As a practical learning event following the recent issuance of the Directive on Small Business Lending by CBRC, the Hefei symposium was well received by the authorities. (News contributed by Luo Zhifang, Operations Officer, the ATF team) MFI Pilots in Inner Mongolia and Sichuan Approved by the Authorities As part of its efforts to develop commercial microfinance in China, over the past year, PEP-China has been actively working with international players to set up two green-field microfinance institutions (MFIs), in Nanchong-Sichuan and Chifeng-Inner Mongolia. These two pilots received the authorities' formal approvals in November-December 2006, marking the achievement of a critical milestone. The MFI investments will be led by PlanetFinance/MicroCred and Accion International/AIM, with equity participations of several leading international financial institutions including IFC. In October-November 2006, PEP-China and Accion team carried out a market survey in Chifeng which confirmed business potential in the region. During the quarter, PEP-China also assisted prospective investors to conduct fact-finding missions to Nanchong. (News contributed by Wang Hengfu, Operations Officer, the ATF team) PEP-China Helped to Put Financial Institution Insolvency Framework on the Policy Agenda PEP-China successfully organized an "International Symposium on the Market Exit Mechanism of Banking Institutions" together with CBRC and the Asian Development Bank on December 12, 2006 in Beijing. The conference was broadcasted to 36 cities in the country through video links. More than 200 regulatory officials, academics, government agency and financial institution representatives attended. Chinese and international experts introduced and debated the merits of and approaches to insolvency regime for banking institutions. PEP-China team and CBRC officials also held a closed-door session on the technical aspects of insolvency intervention. This assistance was timely, coming just after China's Bankruptcy Law was passed which gave the bank regulator a mandate to set up an appropriate system for bank insolvency. The symposium was well covered by domestic and international news media underscoring its importance as a policy signal to institute more discipline on banking institutions through market-based exits. (News contributed by Ma Mingyu, Operations Officer, the ATF team) Credit Training Successfully Delivered to Xi'an CCB Page 3 of 9 From November 6 to 17, 2006, PEP-China conducted two five-day training workshops on credit analysis for Xi'an City Commercial Bank (XCCB). Over 80 XCCB staff attended the training. This concluded the credit analysis component of the TA project to the bank. PEP-China also delivered the Chinese version of a diagnostic report on XCCB's risk management system in November 2006. The next step will be to help the bank validate and improve its much-needed risk rating system. (News contributed by Lei Wei, Operations Officer, the ATF team) Property Law Approved by NPC Standing Committee On December 29, 2006, the National People's Congress (NPC) Standing Committee voted, by an overwhelming majority, to approve the Property Law for submission to a final vote by the Plenary Session of NPC scheduled for March 2007. This is considered a significant and positive political event for the country. During the last quarter of 2006, the tripartite team of PBOC/PEP-China/FIAS on secured transactions reform provided practical support to the authorities in revising the secured transactions chapter, leading up to the seventh draft of the law. The project team is currently planning for a major promotion event focusing on receivables and inventory financing to be held after the expected approval of the law in March 2007. (News contributed by the ATF team) Sustainability Sichuan Environmental Compliance Project Completed The Project, launched in June 2005 to assist SMEs improve their level of environmental compliance, was completed in November 2006. The Project helped build capacity of two municipal environmental protection bureaus (EPBs) in Mianyang and Nanchong, Sichuan Province, and delivered training programs on environment, health and safety (EHS) to local consultants. Nine local SMEs were involved in the Project, which were given workshops on environmental risk assessment and cleaner production. The EHS consultants conducted environmental assessments for four SMEs, which provided recommendations for feasible low-cost solutions. Lessons from the project were discussed with the State Environment Protection Administration (SEPA) and will provide inputs to a broader CSR project designed with IFC Environment and Social Development Department. (News contributed by Chen Rong, Operations Officer, Sustainable Team) North Andre Linkages Program Starts Implementation Joint funded by the IFC, North Andre (a leading apple juice concentrate exporter) and the IFC Trust Fund of the Germany Ministry of Economy and Labour, North Andre Linkages Page 4 of 9 Program is designed to strengthen the traceability system and introduce European "Good Agricultural Practice" (EUREPGAP) in the Company's supply chain. The program will get into full implementation stage in the first quarter of 2007, which involves the development of an integrated Quality Management System (QMS) for the company's operations, development of training material on apple planting technology, training delivered to North Andre staff and farmers, and M&E baseline survey. (News contributed by Qiu Min, Operations Officer, Sustainable Team) Mid-term Review of China Development Marketplace Program Concluded An mid-term review of 2006 China Development Marketplace Program concluded in December 2006. Three out of 31 grantees were picked for the field visits by IFC PEP- China, and the rest were conducted by specialists hired by the World Bank. The one-year grant program is sponsored by the World Bank and aims to improve Chinese NGOs' capacity and their initiatives in poverty reduction. The Program's first-phase fund was disbursed in April 2006. IFC PEP-China is in charge of monitoring and supervision work. Two NGOs visited will receive the full payments of the second-phase fund while the third needs to take more corrective actions. The grantees visited are: Ziyang Women's Association (rural poverty reduction project), Liangshan Yi for Empowerment Center (Yi handicraft development project) and Chaoyang Fungus Research Institute (promoting fungus plantation in pilot villages in Heilongjiang Province). (News contributed by Ni Huan, Communications Officer) CHUEE CHUEE Provides Training to Partners CHUEE team held its first training and orientation events for Industrial Bank and Xinao Group. The training sessions covered energy efficiency technology and financing. In early November, CHUEE team provided a three day orientation course to some 80 product managers, credit officers and loan officers from Industrial Bank, CHUEE's initial partner bank. IFC investment officers provided an overview of energy efficiency loans and the mechanism of working with the CHUEE program. Technical experts from CHUEE held Q & A sessions with Industrial Bank staff and provided tips and advice to loan officers keen to learn how to identify and judge good energy efficiency projects. Staff from CHUEE and IFC PEP- China's Access to Finance team will provide further training to Industrial Bank in 2007. Page 5 of 9 In December, CHUEE team headed to Zhuzhou, Hunan Province, for their first orientation session with Xinao Gas. 30 regional marketing and financial directors from Xinao Gas participated. Representatives of local government and the environmental protection bureau attended. Hunan is one of the fastest growing markets for Xinao Group, and the local government is keen on improving local businesses' energy efficiency. Following the orientation sessions, CHUEE and Industrial Bank investigated several of Xinao's energy efficiency projects. Two projects have been identified as potential kick-off loans for CHUEE, and are currently undergoing the credit review process by Industrial Bank. (News contributed by Ni Huan, Communications Officer) Management Development Business Edge Management Training Program Expanded in 2006 In FY06, the Business Edge Management Training Program focussed on partner development and providing training partners with the ability to develop products and services to suit market needs. Over the year, Business Edge organized 9 train-the- trainers workshops attended by 75 business management trainers. The network of training partners was expanded from 5 to 13, and 5 master trainers were provisionally certified. With a new set of tools developed by PEP-China, Business Edge Plus, Business Edge trainers now have an efficient intervention model to develop customized training and increase the impact of training in SMEs. The expansion to other provinces in Western China, and to secondary cities in Sichuan has been a key objective of our new strategy. Beyond Sichuan, Business Edge has begun partnering with SME development centers in Urumqi and Chongqing as well as with a local training partner in Liuzhou. In total, 37 trainers are now fully trained to support SMEs in these regions. In 2006, the Business Edge Program trained more than 8,000 SME managers in 42 secondary cities in West China. The average customer satisfaction rating was 4.28 on a scale of 5 and 86.1% of participants stated that they learned new knowledge and skills. (News contributed by Management Development team) Newly Developed Training Courses for SMEs To help improve SMEs' access to finance, PEP-China has partnered with local banks in delivering a three-day training course on "How to Access Finance", which were well received by participating SMEs. To help western China's SMEs cope with their rapid growth, PEP-China is also undertaking a feasibility study to develop training courses on "managing growth". Page 6 of 9 In 2007, PEP-China will continue building the capacity of its trainers to develop and deliver high quality courses to meet SMEs' demands for better training that will ensure their long-term sustainable development. (News contributed by Management Development team) Business Enabling Environment Sichuan Value Chain Studies (Pork and Electronics) Findings Echoed by Municipality Mianyang Municipal Officials and local entrepreneurs from electronics industry reacted positively to the Sichuan Value Chain Analysis Report on Consumer Electronics Industry when the PEP-China BEE team disseminated the findings in the city in December 2006. The Municipal Officials expressed their interest in having IFC's technical assistance to implement some of the policy recommendations in the city. Currently PEP-China is working with Sichuan Urban Development Project (SUDP) team to explore the possibility of a WB/IFC collaboration to assist private sector development and investment in Mianyang Economic Development Zones. (News contributed by Wang Lihong, Operations Officer with the BEE team) Visitors to PEP-China Mr. Mark Nielsen, Senior Advisor of Business Edge, visited PEP-China on Oct.27- Nov 1, for Business Edge TOMT. Mr. Alexander Nicholas Wellsteed, Investment officer/IFC, for CHUEE/Mingsheng Bank mission October.20 -30, 2006. Mr. Markku Kavonius, Senior Adviser of Ministry of Trade and Industry, the Finnish government, one of the donors of the CHUEE program, met the newly recruited CHUEE team on Oct 25, 2006. Mr. Ian Crosby, Project Manager of IFC HQ/CES, one of the trainers of the orientation event with the Industrial Bank on the CHUEE program from November 3-12, 2006. Mr. Robert Whyte, Senior Investment Promotion Officer of IFC, visited PEP-China on October 23-28 for the 2nd field work of Sichuan Cluster Development project. Mr. Jaouad Berrada, Executive Vice President of International Credit & Finance Consultants Inc., visited PEP-China on October 24-28 for the International Symposium on Lending to Small Business in Heifei, Anhui Province. Page 7 of 9 Mr. Ronaldo Feyria, Banker and Consultant, visited PEP-China on October 24-28 for the International Symposium on Lending to Small Business in Heifei, Anhui Province. Ms. Mary Miller, Senior Consultant of Development Alternatives, Inc., visited PEP-China on October 24-28 for the International Symposium on Lending to Small Business in Heifei, Anhui Province. Mr. James Weaver, Banker and Consultant, visited PEP-China on November 3-17 for the Credit Analysis Training Workshop in Xian, Shaanxi Province. Mr. Modibo Camara, Senior Operations Officer of IFC, visited PEP-China on Nov. 28- Dec.1 for the China SME Survey project. Mr. Gokhan Akinci, Senior Investment Policy Officer of FIAS, visited Chengdu and Mianyang on December 10-13, for follow-up project of Electronic VCA of Sichuan. Ms. Xiaolun Sun, Senior Investment Policy Officer of FIAS, Mr. Larry Yu, individual consultant from US, Mr. Xingbin Wang, individual consultant from China, visited PEP- China on Oct. 23 ­ 27, for 2nd field mission of Tourism VCA of Sichuan. Ms. Ann Bishop, Communications Advisor of IFC-MPDF, Mr. Michael Wild, Consultant, visited PEP-China on Nov.8-10 for delivering Workshop on Writing Skills. Ms. Monica Chong, Procurement Analyst, Ms. Kimberly Shires, Procurement Assistant, visited PEP-China on Nov.13-14 for Procurement Training. Mr. Byron Lee, Information Analyst in IFC-HK, visited PEP-China on Nov.20-22 for IT Over Haul. Mr. Felix Lippert, Consultant from Germany, visited Yantai on Nov. 19-Dec. 1 for developing documents of North Andre Linkage Project. People Among Us Wang Hengfu Operations Officer, Access to Finance Hengfu joined Access to Finance team, IFC PEP-China in February 2006. He holds three Bachelor's Degrees from the prestigious Tsinghua University, specialized in Electrical Engineering, Economics & Management, and Law respectively. Before he joined us, Hengfu worked for the Bank of China headquarters in Beijing for around seven years from Trainee in Risk Management Department, Officer in NPA Management Department all the way up to the Deputy Manager in NPA Management Department, and then the Senior Manager (Division Chief) in Credit Administration Department. He is enthusiastic in doing creative work, especially those have poverty alleviating effect. He likes reading, doing exercises in gyms, meeting friends and watching movies in his spare time. Page 8 of 9 Coming Up Soon Final due diligence by four investors on Nanchong MFI will be conducted in the last week of February 2007. TA Steering Committee meeting for the United Rural Cooperative Bank is scheduled for March 2007. CHUEE first energy efficiency loan is to be disbursed in January 2007. A multi-year China Corporate Social Responsibility Program is being formulated by IFC CES and PEP-China. The Dairy Linkage program to publish a dairy guidebook for farmers in Sichuan and Yunnan in spring 2007. Comments and/or questions? Contact us at: Huan Ni (Helen) Communications Officer Tel: 86 28 8676 6622 Fax: 86 28 8676 7362 Email: hni@ifc.org Page 9 of 9