China’s freewheeling but troubled financial leasing industry faces stricter supervision as the nation’s top financial regulator considers new rules for the RMB 4 trillion ($576 billion) sector. An industrywide overhaul can be expected, reported Caixin.
The China Banking and Insurance Regulatory Commission (CBIRC) issued a set of draft rules on Wednesday for financial leasing companies, which are supposed to provide financial and leasing services to companies, often for purchasing large equipment. However, the industry has drawn regulators’ attention after years of burgeoning growth as many companies engaged in illegal fundraising, risky investments or even fraud.
“Rumors of the new regulation have been around for a while,” said a Caixin source. “It will lead to a reshuffle in the industry and force out a number of unqualified small players.”
The draft guideline issued Wednesday is aimed at restoring the industry and guiding financial leasing companies back to their original business, analysts said. It is part of a broader fight by regulators against financial risks. China had 10,900 financial leasing companies with total assets of RMB 4.07 trillion as of the end of June, almost all of which had foreign investments. According to a CBIRC-backed industry data system, only 2,985 of them are conducting normal business operations, while fully 72% have either halted business or are mired in crisis.