Newsletter
REGULATIONS ON AUTOMOBILE FINANCE COMPANIES
On 3 October 2003, the China Banking Regula-tory Commission promulgated the Regulations on Automobile Finance Companies which took effect immediately. "Car finance company" as referred to in the regulations means an enterprise other than a bank that extends loans to motor vehicle purchasers and vendors within PRC. In other words, henceforth vehicle financing in the PRC will no longer be the exclusive preserve of the banks. Any other non-banking financial in-stitution, or any other non-financial enterprise, that meets the required conditions, may invest in setting up a car finance company. However, a single investor may not invest in more than one such company. The regulations also apply to investors from Taiwan, Hong Kong and Macao.
The regulations provide that the registered capi-tal of a car finance company must be not less than RMB500 million or the equivalent amount in a convertible currency, and the company may not establish branch offices. The main investor of car finance company must be an automo-bile-related enterprise, or a financial institution other than a bank. The main investor's propor-tional investment must be the highest of all in-vestors, and must be not less than 30% of the intended company's total share capital. An in-vestor that is a financial institution other than a bank must have a registered capital of not less than RMB300 million or the equivalent in a convertible currency. An investor other than a financial institution must have had total assets of not less than RMB4 billion, or the converti-ble-currency equivalent, throughout the previous year, and its operating income for the whole year must have been not less than RMB2 billion or the convertible-currency equivalent.