New auto loan regs to be out ( 2003-09-01 08:58) (China Daily)
China's widely-anticipated auto financing regulation will be formally
promulgated this year, economic sources said.
Ten months after a trial version of the regulation on auto finance companies
was published by the central bank last year for public comment, officials
announced last week that the regulation will be unveiled by the end of this
year.
The unexpectedly long wait after the release of the trial version of the
regulation had dashed early hopes that the rules, which outline market entry
requirements for China's potentially lucrative auto financing market, might come
out as early as the first half of the year.
The auto financing arms of global automakers, including Ford and General
Motors, have applied to the nation's central bank to set up car financing
branches in China, hoping the vast new market could boost their international
sales.
One of the reasons for the delay of the regulation's release, analysts say,
was a government restructuring earlier this year that shifted bank regulatory
functions from the central bank to the newly established China Banking
Regulatory Commission (CBRC).
As a result of the restructuring, the CBRC, instead of the central People's
Bank of China, will be supervising auto financing companies. Just how that
supervision will occur is spelled out in the new regulation.
Applicants will have to file documents again, likely with some revisions,
according to sources within the CBRC.
Another reason for the delay is a central bank inspection in June into auto
lending practices by the four State-owned commercial banks following a major car
loan default in North China's Shanxi Province.
Growing car loan defaults in recent years have prompted nearly all major
domestic insurance firms to announce suspensions over the past few months in
sales of car loan insurance policies.
But such frustrations cannot offset the attractiveness of the vast Chinese
market, where only a 15 per cent or so fraction of its fast-growing car sales
are financed by car loans, as compared to as high of 70 per cent in developed
countries.
The trial rules state that foreign and domestic non-banking financial
institutions wanting to set up car financing businesses in China must have
minimum assets of 8 billion yuan (US$963 million). Such businesses must have at
least 500 million yuan (US$60 million) in registered capital.
Jia Xinguang, an analyst with the China National Automotive Industry
Consulting and Development Corp, said such capitalization standards are
relatively high numbers to meet, especially for Chinese firms.
