Leasing firms to enter asset-backed securities sector

China will soon allow several financial leasing companies to develop asset-backed securities businesses, the nation's banking regulator announced on Wednesday.

At least five financial leasing companies have applied to the China Banking Regulatory Commission to open asset-backed securities businesses.

Among these, ICBC Financial Leasing Co Ltd and Bank of Communications Financial Leasing Co Ltd will become the first to get approval, said Mao Wanyuan, deputy director of the agency's non-banking department.

"We'll make great efforts to develop asset-backed securities businesses in financial leasing companies because these companies have relatively long financing maturity and stable returns on investment. Their financial risks are manageable," said Mao.

As of May 31, there were 24 financial leasing companies in China with total assets of 1.13 trillion yuan ($181.7 billion). Their paid-in capital totaled 84.1 billion yuan, more than 10 times the level at the end of 2007, according to the CBRC.

The companies had a return on assets of 1.44 percent and a return on capital of 13.45 percent at the end of the first quarter. They had an average nonperforming loan ratio of 0.7 percent, lower than the average NPL ratio of 1.04 percent for commercial banks in China, at the end of the first quarter.

After the CBRC first revised the regulation on the management of financial leasing companies in 2007, domestic financial leasing companies made significant progress and became a rapidly growing force in the international leasing market.

Before 2009, foreign companies dominated China's business jet leasing market. But now, the business jet fleet of Minsheng Financial Leasing Co Ltd has reached 191 aircraft, accounting for 80 percent of the business jets in China, said Wang Rong, executive vice-president of the company.

Domestic financial leasing companies are supporting the development of the high-end equipment manufacturing industry and helping domestically made equipment such as large aircraft and rolling stock go global.

In December 2012, the Malaysian low-cost carrier AirAsia took delivery of an Airbus A320 aircraft assembled in Tianjin through a leasing deal with ICBC Financial Leasing.

Apart from joining international competition, financial leasing companies also contribute to the nation's economic restructuring by supporting new energy-related sectors and small businesses.

Minsheng Financial Leasing, for instance, has invested more than 15 billion yuan in providing financing services to 12,500 micro-sized and small enterprises with the adoption of a vendor leasing business model.

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