Leasing in China

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Links China Leasing Industry Forum (the whole page seems to be in Chinese For an article on Foreign-invested leasing entities in China, see here

 

State of the market:

There were 61 domestic leasing companies in China in 1994 (which obviously did not include those in Hong Kong. There were about 34 joint ventures with foreign partners.

Leasing industry was initiated in China in 1981 with the formation of China Orient Leasing Company Limited, the first joint venture leasing company in the country. Although reliable statistics are hard to come by, leasing is currently believed to account for 3-4% of the total investments in fixed assets in China . A report in a Chinese newspaper in August 1998 indicated that the industry reported a business volume of US$700 million last year, according to the Lease Committee of China Association of Enterprises with Foreign Investment statistics.

Leasing associations:

There is an association called China Leasing Industry Forum

 

Law and regulations relating to leasing:

Update In Sept 2001, China came out with Foreign Invested Leasing Companies Regulations, which specify regulatory requirements for leasing companies with foreign investment.

For financial leasing companies, the total assets of the Chinese joint venture partner must not be less than RMB 400 million in the year preceding the application. The total assets of the foreign joint venture partner must not be less than US$ 400 million in the year preceding the application. It must also have five years or more of financial leasing experience. The registered capital of a financial leasing company may not be less than US$ 20 million. The capital contribution of the Chinese joint venture partner must not be less than 20% of the registered capital. The term of operation must not exceed 30 years.

For other leasing companies, the total assets of the Chinese joint venture partner must not be less than RMB 100 million in the year preceding the application. The total assets of the foreign joint venture partner must not be less than US$ 50 million in the year preceding the application. It must also have three years or more of leasing experience. The registered capital must not be less than US$ 5 million. The capital contribution of the Chinese joint venture partner must not be less than 20% of the registered capital. The term of operation must not exceed 20 years.

As is clear, the capital requirements are lesser for operating leasing companies and higher for financial leasing companies.

 

 

A report in August 1998 indicated that China was about to enact a law on leasing - "CHINA'S first acts pertaining to leasing contracts will be discussed at an upcoming meeting of the standing committee of the National People's Congress. A set of clauses included in the contracting law will create a more regulated, fair and flexible climate for the development of China's infant leasing industry, said Wang Guitian, director of the Lease Committee of China Assn of Enterprises with Foreign Investment"

China has recently enacted a Financial Crimes law. This law, called "Procedures for Punishing Illegal Financial Practices" was enacted in early 1999 and is applicable to financial institutions, including banks, credit cooperatives, finance companies, trust and investment companies and financial leasing companies. The law enacts a ban on acceptance of public deposits by trust companies.

Leasing transactions are currently governed by applicable portions of the three existing major contract laws, which at most reflect a traditional rental orientation:: the Law on Economic Contracts (1981, amended 1993), the Law on Economic Contracts Concerning Foreign Interests (1985) and the Law on Technology Contracts (1987). China is currently in the process of drafting a new law on economic contracts which will replace these three laws with a single, unified contract law. This new law will most likely contain a section specifically addressing financial leasing. The rather limited existing coverage of traditional rental contracts is also likely to be expanded. Although work on the new contract law has been going on for some time, its official promulgation is not expected until sometime in 1999

Accounting:

 

Relevant links:

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