China to Open Leasing Industry to Foreign Investors, Paves Way for Foreign Investment Spree

Strategic Insights -

China has announced a new regulation allowing foreign investors to fully participate in the country's leasing industry, marking a significant step towards globalization of the sector. The Ministry of Commerce in Beijing has published a regulation amending the previous provisional regulation implemented in 2001, which will come into force on a trial basis on March 5. This move is aimed at meeting China's commitments to the World Trade Organization (WTO) and is expected to attract more foreign investment in the industry.

Key Takeaways:

  • The new regulation will allow foreign investors to deal with leasing and financial leasing in terms of wholly foreign-owned companies.
  • The minimum registered capital of a foreign financial leasing company will be reduced from US$20 million to US$10 million.
  • All financing leasing firms will be required to submit business reports before March 31 each year.
  • Two multinational companies, GE Capital and Caterpillar, have already set up their wholly-owned firms in China as pilots in the leasing sector.
  • China has 39 foreign-funded leasing companies, with their volume of trade totaling nearly US$1.6 billion in 2004.
  • The number of foreign-funded leasing companies is expected to reach 45 in 2023.
  • Insiders believe foreign investors will bring new business methods to China, enhancing the entire industry.
  • Experts warn that China's leasing industry is still weak, and domestic leasing companies need more support.
  • Domestic leasing companies face an annual income tax of 25%, while foreign firms pay a tax rate of 13%.
  • The Chinese government is urged to strengthen support for domestic financial leasing companies.

Statistics:

  • 39 foreign-funded leasing companies currently operating in China.
  • Total trade volume of foreign-funded leasing companies in 2004: nearly US$1.6 billion.
  • Expected number of foreign-funded leasing companies in 2023: 45.
  • Minimum registered capital of foreign financial leasing companies will be reduced from US$20 million to US$10 million.
  • 25% annual income tax rate for domestic leasing companies.
  • 13% tax rate for foreign leasing companies.

Sources:

  • Xinhua News Agency (XIC) 22-02 1853.