Chinese-Based Firms Confirm Minimal Exposure to Silicon Valley Bank

The recent shutdown of Silicon Valley Bank (SVB) by regulators marks the largest bank failure in the United States since 2008. Many Chinese Hong Kong-listed companies, including Noah Holdings, Broncus Medical, and CStone Pharmaceuticals, have sought to reassure investors by stating that their cash deposits in SVB were not significant.

News emerged that Pan Shiyi, a Chinese businessman, co-founder and former Chairman of SOHO China, and his wife Zhang Xin have large deposits in SVB. Due to the bank’s recent bankruptcy, billions of deposits could not be withdrawn, resulting in no return. However, Pan later denied that he had ever opened an account at the bank.

Founded in 1983, SVB has been the most active bank in the field of investment and financing for high-tech startups, and it is one of the largest local banks in Silicon Valley. Its customers are mostly technology startups and investment institutions.

According to Bloomberg, on March 12, more than 100 venture capital and investment companies signed a statement supporting SVB, calling for limiting the impact of the bank’s failure and avoiding a possible “extinction-level event” for technology companies.

According to Yicai‘s report, the crisis has also affected Chinese entrepreneurs. “I didn’t expect to wake up and catch up with the bank’s bankruptcy,” the founder of a Chinese medical startup said on March 11. Most of his company’s dollar assets are in SVB, which is mainly used to pay American office workers.

Luckily, because of the small size of the enterprise, the entrepreneur does not have a lot of dollar funds in SVB, only involving hundreds of thousands of dollars. “I know many Chinese startups that have also deposited their money in SVB. Compared with some large technology companies with deposits of hundreds of millions of dollars, I have not lost much. The insurance company’s claim limit is $250,000, so the risk is relatively controllable,” he added.

On March 13, the Federal Deposit Insurance Corporation (FDIC) and financial regulators said in a joint statement that all depositors of SVB will be able to use their funds on Monday. “Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” the statement showed. On the same day, in an official statement by the Federal Reserve, $25 billion in funding from the Treasury from the Exchange Stabilization Fund will serve as a backstop for the facility program. But the Federal Reserve said it does not anticipate that it will be necessary to draw on these backstop funds.

Amid this chaos, Razer CEO Min-Liang Tan suggested that Twitter should consider buying SVB and turning it into a digital bank. Interestingly, Twitter chief Elon Musk responded to his tweet, saying, “I’m open to the idea”.

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The collapse of SVB comes at a challenging time for the technology industry. Cheap funding channels have been eroded by rising interest rates, which has led to a decrease of 37% in venture capital investments in the US compared to the previous year, according to data released by CBInsights in January 2023. Additionally, macroeconomic uncertainty and recession fears have led to tighter spending by some advertisers and consumers, weakening the revenue driver of the technology industry. As a result, large technology enterprises have been forced to implement cost-cutting plans focused on efficiency, resulting in mass layoffs.