4 Chinese cities to set up consumer finance firms on trial basis

May 13, 2009 (China Knowledge) - Beijing, Shanghai, Tianjin and Chengdu will be allowed to establish consumer finance companies on a trial basis, according to draft rules released by the China Banking Regulatory Commission (CBRC), the nation's banking watchdog, on Tuesday.

The consumer finance companies, which will not take deposits, will provide consumer loans for the purchase of consumer durables, including home appliances and electronic products, as well as ordinary expenditures for education, tourism, weddings and home renovation.

The rules say that loan funds for the purchase of consumer durables must be paid directly to distributors, while loan funds for ordinary consumption can be paid out to borrowers.

New consumer finance companies should have a minimum registered capital of RMB 300 million.

The move is expected to further help boost domestic consumption and maintain China's stable economic growth in spite of the ongoing global economic recession, which has hurt the nation's exports, one of the three economic engines of the country.

China's retail sales reached RMB 2.94 trillion in the first quarter of this year, representing a year-on-year rise of 15%, according to an earlier report from China Knowledge.