Regulatory Commission to Expand Consumer Financing Pilot Program to Ten More Cities

Regulatory Commission to Expand Consumer Financing Pilot Program to Ten More CitiesThe banking regulator in the country will be expanding its consumer financing pilot program to ten more cities as they attempt to bring in more private capital in lending markets. Last week the China Banking Regulatory Commission stated that the expansion will meet the demand of lower and middle income consumers while boosting consumption in the private sector.

Credit in China skewed towards the large scale State owned entities and increases loan facilities for consumers and other small businesses will be seen as a crucial in re-balancing the economy towards the growth will be driven by consumers. Household consumption in the country was 34 percent of the gross domestic product in 2011 compared to the global average of 61 percent which is based in the World Bank data. Also the annual growth in the retail sales peaked around 22 percent in February of 2010 but was only 13 percent this August.

The program has already started through consumer finance companies in Beijing, Shanghai and Tianjin and Chengdu. Other cities such as Guangzhou, Qingdao and Chongqing will be added.

Furthermore non bank financial institutions that have a total assets in the previous year with more than 80 million and a net asset ratio at least 30 percent can now apply to create a consumer finance companies and can now lend for purchases of consumer good, but not for mortgages and car loans.

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