The First Batch of Three Auto Finance Companies Have Been Approved by Chinese Companies Without Approval
The first batch of auto finance companies has received approval from the China Banking Regulatory Commission (CBRC), marking a significant development in the financial sector. However, none of the approved entities are Chinese-owned. The three companies that have been given the green light to proceed are SAIC General Motors Financial Co., Ltd., Toyota Motor Finance (China) Co., Ltd., and Volkswagen Automotive (China) Co., Ltd. These approvals come under the newly issued "Administrative Measures for Auto Finance Companies" and its implementation rules, which aim to regulate and promote the growth of this emerging financial segment.
SAIC General Motors Financial is a joint venture between U.S.-based General Motors Financial Services Corporation and Shanghai Automotive Group Finance Co., Ltd. It is planned to be established in Shanghai. On the other hand, Toyota Motor Finance (China) and Volkswagen Automotive (China) are both wholly foreign-owned enterprises, set to operate in Beijing, backed by Toyota Financial Services and Volkswagen Financial Services respectively.
The applications were submitted in early December 2003, with each company submitting their proposals to the CBRC through local banking regulators in Shanghai and Beijing. After thorough compliance reviews, the CBRC gave the final nod for the establishment of these three firms. This swift approval process is considered rare in the history of China's financial regulation.
According to an official from the CBRC, the commission follows the principle of national treatment, ensuring equal evaluation for both domestic and foreign applicants. Approval is based solely on whether the applicant meets the required market access standards.
Once approved, these companies will need to complete their preparatory work within six months, including setting up capital, hiring management, securing business locations, and drafting internal regulations. After this period, they can apply for operational licenses. If the requirements are met, they will be allowed to start operations and provide financial services to the public.
During the preparation phase, no business activities may be conducted under the name of an auto finance company. Failure to meet the necessary conditions could result in the loss of the right to open, and no new application can be made for six months.
The introduction of these auto finance companies represents a new category of non-banking financial institutions in China, enhancing the diversity of the financial system. The regulatory framework, introduced in October and November 2003, provided a clear path for the establishment of such entities, ensuring transparency and efficiency in the application process.
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