BEIJING, CHINA – MARCH 4: The Chinese flag flies in the Great Hall of the People as the second session of the 14th National Committee of the Chinese People’s Political Consultative Conference opens in Beijing, China, on March 4, 2024. (Photo credit: VCG/VCG, Getty Images)
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China has tightened regulations on consumer finance companies and raised capital limits for non-bank financial companies that provide small personal loans.
this Announce measures The “Measures” issued by the State Financial Supervision and Administration Bureau on Tuesday will be implemented on April 18.
The move comes as Beijing tightens its grip on the financial industry.
The new rules stipulate that companies eligible to provide consumer loans (excluding home and car purchase loans) must have a registered capital of at least 1 billion yuan ($139 million). That’s three times the minimum amount set out in the previous 2014 rules, according to Reuters.
The statement said that investors in consumer finance companies are divided into major investors and general investors. Major investors need to hold at least 50% of the shares.
Financial institutions that are major investors must have total assets of at least 500 billion yuan ($69.45 billion) or the equivalent in freely convertible currencies as of the end of the latest fiscal year, the regulator said.
According to the National Financial Supervision Bureau, major investors in non-financial institutions must have operating income of at least 60 billion yuan ($8.3 billion) in the most recent fiscal year.
Over the past few years, China has been trying to limit the rapid growth of non-bank debt, especially debt issued by shadow banks outside the formal banking system.
Slowing economic growth in the country has also affected the creditworthiness of the entire Asia-Pacific region.
Moody’s lowered the outlook on China’s government credit rating from stable to negative in early December on the grounds that support measures taken by Beijing to prop up the financial sector could weaken its fiscal, economic and institutional strength.
Earlier this month, China set a GDP growth target of “around 5%” in 2024 at the “Two Sessions” meeting and announced the issuance of “ultra-long” special bonds for major projects.
—CNBC’s Evelyn Cheng and Clement Tan contributed to this article.
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