Xinhau logo.gifXinhua Finance, the financial information provider, is riding the wave of interest in China's financial services industry.

Its half-year sales are up more than 60% to $75m and, like other leaders of China's new economy, it is now flexing its muscles on the international stage with some interesting acquisitions.

Shanghai-based Xinhua Finance regularly crops up in EngagingChina as a primary source of much of China's financial and business news. But that familiar news-gathering role tells only half the story.

The firm, which is quoted on Tokyo's Mothers exchange, wants to go beyond selling pure information and become a media distribution powerhouse, offering a rich range of content and advertising to a broader audience.

In particular, it wants to expand beyond its current customer base of financial institutions to reach China's growing number of “high net worth” individuals.

The aim is to capitalise on the advertising opportunities that arise from being able to reach this elusive demographic — much sought after by China's fledgling wealth management industry.

To broaden its footprint, Xinhua Finance has recently been hitting the acquisition trail in a big way, snapping up a string of specialist research providers and boutique analysis firms in the west. The likes of Market News International, G7 Group, Washington Analysis and Stone & McCarthy Research Associates are all now owned by Xinhua.

Last week, Xinhau Finance bought a stake in Glass, Lewis & Co, a US firm which specialises in proxy voting services. This seemingly arcane backwater has shot to prominence in the US because of the current obsession with corporate governance.

As China's markets open to foreigners and a mainland equity culture develops, so too will the market for proxy services, Xinhua Finance argues. Thats because China's public companies have complicated shareholding structures which can make the voting process for a foreign investor very difficult. Fredy Bush, Xinhau Finance CEO, says:

We see demand for the services Glass Lewis provides, as foreign investment in China's public companies is increasing dramatically through the Qualified Foreign Institutional Investor mandates.”

More on QFII in this earlier EngagingChina post.

Another interesting recent acquisition is Praedea Solutions, a New York-based company that makes software to automatically extract financial data from filings and reports. Again, that may seem arcane but this technology helps meet the growing demand for transparent financial reporting.

Praedea's software is designed to replace the manual processes and legacy systems traditionally used to obtain financial data. It can automatically extract data from financial statements and other unstructured documents in any language.

The extracted data can then be put in a database or delivered as a standard XML file or using XBRL — the emerging standard for electronic reporting. Source links allow the reader to go back to original data source for absolute transparency.

Xinhua Finance also has a subsidiary, Beijing Alpha, that develops risk management systems. This is an area that is now coming under the spotlight as financial institutions in China realise that the liberalisation of the country's financial markets creates not just big opportunities but also greater risks.

If Xinhua Finance's expansion strategy sounds eerily similar to that adopted by the likes of Reuters or Bloomberg, then you are right. It remains to be seen whether its bigger western rivals view that as a compliment — or as a threat.


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