In December 2008, the State Council released the Several Opinions on Extending Financial Support to Economic Growth (the Opinions), which proposed to develop the bond market and expand bond issuance. In particular, the Opinions specified that efforts should be made to support the SMEs by implementing financing guarantee and other supportive policies, and to develop the auto consumer credit business and expand financing channels for auto finance companies. In order to carry out the plans outlined in the Opinions, and in an effort to step up financial support to economic growth and give additional financing access to financial leasing companies and auto finance companies, the People s Bank of China (PBC) and the China Banking Regulatory Commission (CBRC) jointly formulated and issued the Announcement of the PBC and the CBRC (No. 14 [2009]). According to the Announcement, qualified financial leasing companies and auto finance companies are allowed to issue financial bonds if specific requirements are met. The Announcement is implemented on the day of its release.
Allowing financial leasing companies and auto finance companies to issue financial bonds is a major step towards steadily expanding the scope of bond issuers and accelerating bond market development while making sure risks are under control, and is part of the efforts to implement the State Council s strategic arrangements aimed at expanding domestic demand, supporting economic growth, restructuring the economy and improving social welfare.
Financial leasing companies provide financing support mainly to SMEs by leasing equipments. At end-July, there are 12 financial leasing companies in China, with a total asset of 108.1 billion yuan. Access to the bond market will help financial leasing companies gain access to more fund sources, expand their financial leasing businesses, and enhance their capacity to support SMEs.
Auto finance companies offer financial services to auto buyers and dealers. At end-July, there are 10 auto finance companies with 37.8 billion yuan worth of assets. The decision to allow auto finance companies to issue financial bonds will increase financing channels for these companies and promote the development of auto consumer credit, thus boosting domestic auto consumption and supporting the revitalization of the Chinese auto industry.
The approval of issuance applications, bond underwriting, registration, deposit, credit rating, information disclosure and other matters regarding financial bond issuance by financial leasing companies and auto finance companies are governed by the Administrative Rules for the Issuance of Financial Bonds in the National Inter-bank Bond Market (PBC Decree No. 1 [2005]).
