Four Banks Apply To Join Financial Leasing Trial

飞雪寒冰

Four commercial banks have applied to set up financial leasing companies under a trial program recently approved for expansion by the State Council.

Huaxia Bank, Pudong Development Bank, Industrial Bank and China Everbright Bank have submitted applications, an official with the China Banking Regulatory Commission who declined to be identified told Caijing. The applications have yet to be officially announced.

"We will decide applicants' suitability according to their market positions, strategic plans and operations," the official said.

飞雪寒冰

China's leasing business is just taking off, according to the official, who said institutions offering financial leases should concentrate on small and mid-sized enterprises, instead of large clients.

Financial leasing allows users of capital-intensive equipment like aircraft or ships to acquire the rights to the equipment without the massive outlays required in straight purchase deals, and without taking on the risk of obsolescence. Users also retain the option to own the equipment at the end of the lease period. Meanwhile, equipment suppliers benefit from leasing because such arrangements expand their ability to move capital goods.

Potential lease clients like shippers and airlines are currently facing an excess-capacity market, which could favor less capital-intensive forms of acquisition. Chinese airlines in particular are heavily indebted and may not have the funds to meet their purchase obligations should the need for additional aircraft arise.   

In November 2007, ICBC Leasing Co was the first to win approval under the financial leasing trial program. An ICBC Leasing official said in March that he views the government’s stimulus package as an opportunity for the budding sector. ICBC Leasing plans to double registered capital to 4 billion yuan to boost its ability to pursue deals.

China Construction Bank, Bank of Communications, China Minsheng Banking, China Merchants Bank and China Development Bank have already established financial leasing units.