CBRC Announces Regulations for Auto Financing
China's Central Banking Regulatory Commission (CBRC)
announced new regulations which open the field to non-Chinese
auto financing corporations. The step is a further move
in China's compliance with WTO (World Trade Organization)
regulations when it joined in 2002.
Until the new regulations were announced, auto companies
were barred from the auto financing field. China's auto
sales have been growing at a blistering 80 percent this
year, but so far, non-Chinese auto finance makers have
not been able to get into the field, which has been dominated
by China's four leading banks. For America's leading car
makers, their finance arms are usually more profitable
than their auto manufacturing arms. General Motors, Ford
and Volkswagen all have large auto financing arms. The
auto financing industry also drives auto sales by offering
favorable terms on their own brand vehicles.
According to the new regulations, foreign and domestic
auto makers with more than US$483 million in assets the
year before application and annual sales of more than
US$242 million can apply to set up auto financing companies.
These companies must also have been profitable for more
than three consecutive years.
While China's auto sales this year have been impressive,
some estimates place the percentage of defaults on auto
loans as high as 30 percent. Currently, China's credit
reporting system is not yet on a par with developed nations.
It is believed that the opening of the auto finance field
will spur development of reporting capabilities in this
area.
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