More finance companies allowed to issue bonds, SMEs to benefit

By Zhao Qian

Financial leasing companies and automotive finance companies have been allowed to issue bonds.

Analysts predicted yesterday that this will give a further boost to domestic consumption.

Financial leasing companies and automotive finance companies that have a minimum of 500 million yuan ($73.20 million) and 800 million yuan ($117.12 million) in registered capital respectively will be eligible to issue bonds, according to the joint statement issued Monday night by the People's Bank of China and the China Banking Regulatory Commission.

Companies issuing bonds will have to maintain an 8 percent capital adequacy ratio (CAR), the statement said.

Most economists agree that the standard guarantees a lending institution's financial stability.

The financial leasing companies' business is focused on lending equipment to small-and medium-sized enterprises (SMEs).

Automotive finance companies primarily provide financing services to car buyers and sellers.

Financial leasing companies and automotive finance companies are not permitted to receive any deposits in China.

"Financial leasing and automotive finance companies are enabled to expand the amount they can lend. This should be good for their business," Guo Tianyong, director of the Chinese Banking Research Center of Central University of Finance and Economics, told the Global Times yesterday.

"It will also be good for the growth of SMEs as well as improve auto sales across the country," he added.

The new policies were adopted to allow more companies to have access to bonds and expand the scope of lending, the regulatory commission's statement said.

"Unlike the banks, financial leasing and automotive finance companies will not be issuing large numbers of bonds. The government needs to promote bond issuance on this scale in the future to further bolster SMEs," Guo said.

Both bond issuers and holders need to make good business decisions in order to maintain optimal economic performance and avoid risks, Zhao Xijun, a professor at Renmin University, told the Global Times.

There are 12 financial leasing companies and 10 automotive finance companies in China with total assets of 108.1 billion yuan ($15.83 billion) and 37.8 billion yuan ($5.53 billion) respectively as of the end of July, the statement said.

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