Consumer credit gets boost
By Zhang Fengming |
January 8, 2010, Friday
|
Print Edition
Print Edition
SHANGHAI'S first consumer credit company has gained regulatory approval and is expected to start business within six months, joining two others which have been allowed to operate the service in China.
The China Banking Regulatory Commission has given the go-ahead to BOC Consumer Finance Co in Shanghai, which was established by the Bank of China, Bailian Group and Lujiazui Finance Development Co.
The Bank of Beijing and the Bank of Chengdu have also gained approval to set up similar credit companies in their home cities.
BOC Consumer Finance, based in Pudong New Area, has a registered capital of 500 million yuan (US$73.21 million), more than the regulatory minimum of 300 million yuan.
The Beijing-based bank, China's biggest foreign exchange bank, invested 255 million yuan for 51 percent of the company. Bailian, China's largest retail conglomerate, invested 150 million yuan for a 30 percent stake while Lujiazui Finance, an arm under the Pudong New Area government, paid 95 million yuan for a 19 percent stake.
The Pudong government yesterday declined to give more details.
"Consumer credit is a significant step to boost domestic demand as China tries to improve its economic structure," said Lu Zhengwei, the Industrial Bank's senior economist. "The shift has become more urgent since the global credit crunch."
Consumer credit firms can offer quick, short-maturity, small-sum loans to consumers to ease purchases of home appliances or for other needs. They don't need collateral.
Some economists, however, believed that it may take some time for credit companies to make their presence felt.
Zuo Xiaolei, China Galaxy Securities Co's chief economist, said earlier that borrowing for daily consumption is still against the grain for most people.
"Consumer credit can weaken the Chinese tradition of frugality," Zuo said. "It will take years for the companies to bear fruit."
Individual mortgages and auto loans took years to be accepted after they were introduced in China.
The China Banking Regulatory Commission has given the go-ahead to BOC Consumer Finance Co in Shanghai, which was established by the Bank of China, Bailian Group and Lujiazui Finance Development Co.
The Bank of Beijing and the Bank of Chengdu have also gained approval to set up similar credit companies in their home cities.
BOC Consumer Finance, based in Pudong New Area, has a registered capital of 500 million yuan (US$73.21 million), more than the regulatory minimum of 300 million yuan.
The Beijing-based bank, China's biggest foreign exchange bank, invested 255 million yuan for 51 percent of the company. Bailian, China's largest retail conglomerate, invested 150 million yuan for a 30 percent stake while Lujiazui Finance, an arm under the Pudong New Area government, paid 95 million yuan for a 19 percent stake.
The Pudong government yesterday declined to give more details.
"Consumer credit is a significant step to boost domestic demand as China tries to improve its economic structure," said Lu Zhengwei, the Industrial Bank's senior economist. "The shift has become more urgent since the global credit crunch."
Consumer credit firms can offer quick, short-maturity, small-sum loans to consumers to ease purchases of home appliances or for other needs. They don't need collateral.
Some economists, however, believed that it may take some time for credit companies to make their presence felt.
Zuo Xiaolei, China Galaxy Securities Co's chief economist, said earlier that borrowing for daily consumption is still against the grain for most people.
"Consumer credit can weaken the Chinese tradition of frugality," Zuo said. "It will take years for the companies to bear fruit."
Individual mortgages and auto loans took years to be accepted after they were introduced in China.
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