The First Batch of Three Auto Finance Companies Have Been Approved by Chinese Companies Without Approval
The first batch of auto finance companies has been approved by the China Banking Regulatory Commission (CBRC), marking a significant step in China's financial sector. However, none of the approved entities are Chinese-owned; all three are foreign or Sino-foreign joint ventures. The approved companies include SAIC General Motors Financial Co., Ltd., Toyota Motor Finance (China) Co., Ltd., and Volkswagen Automotive (China) Co., Ltd. These firms were granted permission to proceed with their establishment following the implementation of the "Administrative Measures for Auto Finance Companies" and its related rules.
SAIC General Motors Financial is a joint venture between the U.S.-based General Motors Financial Services Corporation and Shanghai Automotive Group Finance Co., Ltd., and is set to be based in Shanghai. Toyota Motor Finance (China) and Volkswagen Automotive (China) are both wholly foreign-owned institutions, with the former to be headquartered in Beijing and funded entirely by Toyota Financial Services, while the latter will be owned by Volkswagen Financial Services.
In early December, each of these companies submitted applications to the CBRC. After thorough compliance reviews, the Shanghai and Beijing banking regulators reviewed the proposals and forwarded them for final approval. This swift process—completing the market access approval within a short timeframe—is considered rare in China’s regulatory history.
A senior official from the CBRC emphasized that the commission adheres strictly to the principle of national treatment, ensuring equal evaluation for both domestic and foreign applicants. Approval is based solely on whether the applicants meet the required market entry standards.
Once established, the three companies are expected to complete their preparatory work by mid-2004 and begin operations soon after. This development will introduce a new type of non-banking financial institution into China's financial system: auto finance companies.
According to the CBRC, during the preparation phase, the companies must secure capital, appoint management, establish business locations, draft articles of association, and develop operational policies. All preparations must be completed within six months, followed by an application for formal operation. If the requirements are met, the companies can start providing financial services. Otherwise, they may lose their eligibility and cannot reapply for six months.
Additionally, during the preparation period, the companies are not allowed to conduct any business activities under the name of an auto finance company.
To ensure transparency and clarity, the CBRC issued the "Administrative Measures for Auto Finance Companies" and its implementing rules in October and November 2003. They also developed detailed guidelines to assist both applicants and regulators throughout the process. These measures laid the foundation for the emergence of auto finance companies in China and ensured a smooth and structured application process.
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