Chinese leasing firms may issue bonds

China’s financial leasing firms and automobile financing companies will be allowed to issue bonds in an effort to expand their fund-raising channels, the Wall Street Journal reported. The article cited a joint statement issued by the People’s Bank of China and the China Banking Regulatory Comission, posted on the bank’s website yesterday. In anticipation of the end of the stimulus policy, Beijing is trying to direct funds to small- and medium-sized firms. Financial-leasing firms can lend assets, such as machinery, that can act as collateral for bank loans. Additionally, allowing auto-financing companies to issue bonds will ultimately help boost domestic demand for cars and trucks. The rules take effect immediately, but companies must ensure that their capital adequacy ratio is no lower than 8% after the issuance of bonds. They also must have been profitable for the past three years, showing an above-industry-average profit for the past year. They must have also demonstrate sufficient risk control and their non-performing asset ratio for the preceding year must be lower than the industry average. If they want to issue bonds, leasing companies should have registered capital of at least RMB500 million (US$73.16 million) or the equivalent value in a convertible currency, while auto finance companies should have registered capital of at least RMB800 million or an equivalent amount.