Auto financing competition to heat up in China ( 2003-10-19 10:35) (Xinhua)
Auto financing companies
(AFCs) are ready to compete with commercial banks for the Chinese auto finance
market following new regulations that allow domestic and foreign firms to
provide auto loans to customers.
Under the rules issued by the China Banking Regulatory Commission (CBRC)
early this month, companies with total assets over 4 billion yuan (480 million
dollars) and registered capital over 500 million yuan (60 million dollars) are
eligible to set up business.
Unlike commercial banks that mainly deal with loans, AFCs set up by large
auto groups are capable of offering "one-stop" services, including extending
loans or providing guarantees for such loans, purchasing cars and after-sales
service like car maintenance.
AFCs can also reduce their loan rates to zero to attract car buyers, though
it is still not possible under present tight controls on interest rates.
"Professional auto financing companies will play a major role in China's
future auto market," predicted Zhou Liqun, head of a state research team on auto
consumption policy.
Foreign auto giants are closely watching the market as the rules, part of
China's WTO commitments, have removed their final market barrier.
Germany's Volkswagen and US-based General Motors and Ford have made
preparations for car finance businesses in China and begun to apply for
operating licenses.
"Foreign AFCs, with a professional service system, will have an obvious
impact on the present auto financing market," said Jia Xinguang, chief analyst
of the Beijing Auto Industry Development Research Institute.
Although car loans to individuals had increased sharply since 1998, less than
20 percent of car buyers purchase with credit, against 70 percent in developed
countries.
Car manufacturers predict that with the move to boost the auto market, car
sales will rise by 20 percent while the average price drops by 5 percent. ?MDNMˉ
