Nov. 22 (Bloomberg) -- China is expanding a trial program that allows non-bank financial institutions to lend to buyers of retail goods, as policy makers seek to increase the role of private capital in the economy.
The number of cities where consumer finance companies can be set up will increase to 14 from four, according to revised rules published on the website of the China Banking Regulatory Commission today. The program will also expand to include qualified non-financial companies, under rules that will take effect next year, the CBRC said.
The expansion follows Chinese leaders’ announcement this month of the biggest overhaul of the economy since the 1990s, including a plan to allow private investors to set up small to medium-sized banks. Premier Li Keqiang is seeking to reduce the government’s role as the world’s second-largest economy heads for its slowest growth in more than two decades.
By expanding the types of investors in consumer finance, the regulator hopes to “make full use of private capital,” an unidentified CBRC spokesperson said in a separate statement on the revised rules. Individuals will be allowed to borrow as much as 200,000 yuan ($33,000) from consumer finance companies, compared with a previous limit of five times their monthly income, the CBRC said.
Under the trial program that has set up one company each in Beijing, Tianjin, Shanghai and Chengdu since 2009, consumer finance companies aren’t allowed to take deposits from the public or fund purchases of houses or cars.
In addition to adding the 10 cities, the revised rules will permit two qualified financial institutions from Hong Kong and Macau to set up consumer finance business in Guangdong province, bringing the number of new companies to 12, the regulator said.
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