China's State Council has given the nod to five commercial banks to deal in the financial leasing business, a banking regulator said yesterday.

 

The five banks have won approval from the State Council, and the China Banking Regulatory Commission (CBRC) is conducting further checks, Cai Esheng, CBRC vice-chairman, said at a leasing forum.

 

He did not name the banks. China Construction Bank and China Minsheng Banking Corp have announced earlier that they have applied for a financial leasing license.

 

The Industrial and Commercial Bank of China, Bank of Communications and China Merchants Bank have also submitted applications, banking sources have said.

 

"The CBRC will allow more qualified commercial banks to set up financial leasing companies, based on market demands," Cai said.

 

The five will be the first batch of commercial banks to operate in the leasing sector. The CBRC revised the rule on financial leasing, allowing commercial banks to establish leasing companies, seven years after it stopped issuing financial leasing licenses to clean up the industry.

 

Currently, there are 12 financial leasing companies, all of which received approval before 1995. Only six are still in regular operation.

 

According to Cai, these companies had combined assets of 14.2 billion yuan at the end of 2006 and made a net profit of 130 million yuan last year.

 

There are also 70 leasing firms, not owned by financial institutions, with assets of 30 billion yuan at the end of 2006.

 

"The current industry situation does not match the rapid economic growth. There is huge potential," Cai said.

 

At the end of 2005, China's leasing operations were around US$4.25 billion, accounting for only 0.16 percent of the country's gross domestic product, lagging far behind more developed economies, he said.

 

"Bank involvement will greatly boost the development of leasing industry," he added.

 

With advantages in client base, networks, capital, human resources and brands, leasing companies by commercial banks can help finance small and medium-sized enterprises and offer flexible leasing arrangements, he said.

 

(China Daily June 15, 2007)