China Spurs Aircraft Lessors to Expand Abroad for Growth

China is encouraging financial institutions with aircraft-leasing businesses to look for opportunities overseas for expansion and fundraising.

Leasing companies are required to have a capital of 50 million yuan ($8.1 million) or equivalent in a “freely convertible currency,” the China Banking Regulatory Commission said in a statement on its website. Financial companies should hold a majority stake in these units, it said.

China is pushing leasing companies to reduce their dependence on the domestic market to better compete with bigger international players such as AerCap Holdings NV (AER) and General Electric Co. (GE)’s GE Capital Aviation Services unit. The expansion would also give Chinese lessors greater flexibility to deploy aircraft outside the country, according to Fitch Ratings.

“Scale is very important in the aircraft leasing business,” said Jonathan Lee, head of Asia Pacific non-bank financial institutions at Fitch in Taipei. “It’s a natural evolution of the market.”

Chinese lessors have been focused on the domestic market since the regulator first allowed banks to start aircraft leasing in 2007. The country’s biggest leasing companies are units of Industrial and Commercial Bank of China Ltd. and China Development Bank Corp., Fitch said in a June 19 report.

Lessors in China have been ordering aircraft from manufacturers such as Airbus Group NV and Boeing Co. to support their growth. Hong Kong Aviation Capital Co., the lessor whose shareholders include China’s HNA Group, ordered 70 Airbus planes worth $7.7 billion earlier this month.

To contact the reporter on this story: Clement Tan in Hong Kong at ctan297@bloomberg.net

To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net Suresh Seshadri

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