Chinese regulators will continue to curb risks in a multitude of methods including the latest tightening of its financial leasing sector.
More stringent oversight will be applied to the 10,900 leasing firms, as of June-end last year, which held assets that totaled more than 4 trillion yuan ($577 billion), according to a «Reuters» report citing a China Banking and Insurance Regulatory Commission (CIBRC) statement. 72 percent of the firms were either shell companies or had halted their businesses, the report added.
The new draft rules will require the industry to reduce risky assets and excessive financing of a single client. The CIBRC stressed in its statement that firms in the «fast-growing sector have deviated from their main business of offering financing and leasing services to companies». Prudence and regulatory consistency are required to drive the market back to its primary busies, the regulator said.
Impact
The draft rules mark yet another move by authorities to rein in on risks in China’s domestic financial system. On financial leasing, one prominent case last year involved healthcare firm Remote Horizon Group and its chairman Han Shanchun who is facing fraud claims for allegedly failing to deliver medical equipment under leasing contracts involving more than $3.8 million.
Risks aside, the regulatory change is also expected to «a reshuffle in the industry and force out a number of unqualified small players», said a «Caixin» report, citing unnamed industry sources.
