Private capital trial scheme expands
Print Edition
China is expanding a trial program that allows private capital to invest in consumer finance companies which provide loans directly to consumers as the government liberalizes its financial system and promotes a greater role for consumption in driving the economy.
In 2009, Shanghai, Beijing, Tianjin and Chengdu were allowed to establish a consumer finance company — a small lender that provides loans to retail goods buyers. The China Banking Regulatory Commission has expanded the trial scheme to 14 cities, with 12 more new companies approved to be set up, according to a statement released on its website yesterday.
As well as raising the number of consumer finance companies, the expansion also allows private investors to establish such financial firms for the first time. The expansion follows a directive in July from the State Council to encourage private capital to invest in consumer finance.
Domestic non-financial companies with annual revenue of more than 30 billion yuan (US$4.9 billion) in the past one year are allowed to invest in the consumer finance companies.
The previous threshold of minimum shareholding is cut from 50 percent to 30 percent, the CBRC said.
Individuals will be allowed to borrow up to 200,000 yuan from consumer finance companies, compared with a previous limit of five times their monthly income.
The new financial firms are also now allowed to do business beyond their registered cities.
Qualified financial institutions in Hong Kong and Macau can set up consumer finance companies in Guangdong Province, the CBRC said, citing the Closer Economic Partnership Arrangement between China’s mainland and the two cities.
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