China delivered more specifics on how it plans to open up the country’s financial services sector by yearend, which will include the encouragement of foreign ownership in auto finance, the central bank announced in a press release today.
On Tuesday, President Xi Jinping made a broad announcement about China’s efforts to expand reforms and open up markets during opening remarks to the annual conference of the Boao Forum for Asia (BFA). Today, Yi Gang, governor of the People’s Bank of China, elaborated on how those reforms will play out in the finance sector in the coming months.
Gang laid out 12 initiatives the PBOC will implement this year, including plans to “encourage foreign ownership in trust, financial leasing, auto finance, currency brokerage, and consumer finance.”
Since 2009, China’s new-vehicle sales have exceeded the United States, meaning China has become part of the world’s largest new-car market, according to a report from Deloitte Consulting, but there are serious limitations and hurdles for foreign OEMs and captives. For the past 30 years, Chinese regulations required that foreign automakers create joint ventures in order to manufacture foreign-branded cars within the country, often meaning that those automakers owned less than 50% share of the partnership.
Examples of recent joint ventures include Groupe PSA’s captive, Banque PSA Finance, and Chinese manufacturing partner, Dongfeng Motor Corp., which formed a leasing joint venture to attract millennials earlier this month. And last year, there were numerous high-profile joint ventures, including Volkswagen and JAC Motors (adding to the German automaker’s existing partnerships with Shanghai Automotive Industry Corp. and China FAW Group Corp.), BMW AG and China FAW Group Corp., and Daimler AG and BAIC Motors.
With today’s announcement, securities companies, fund managers, futures companies, and life insurers had their ownership caps raised to 51% and were promised that the limits will be removed entirely within three years. However, neither a raise nor an elimination of the cap was proposed for car manufacturers or their finance arms.
“The previously announced opening-up measures have been implemented smoothly,” the PBOC said in the release. “We have lifted market access limit for bank card clearing institutions and non-bank payment institutions, eased restrictions on rating services provided by foreign financial service companies, and granted national treatment to foreign credit information companies.”
“We have every intention to translate [these proposals] into reality sooner rather than later,” President Jinping said in his speech.
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