GM's General Motors Acceptance Corp., which has a joint venture with Shanghai Automotive Industry Corp., was the first foreign automaker to seek and receive approval for handling vehicle financing in China.
China strictly controls auto loans, requiring that lenders' guaranteed loans not exceed 200 percent of their registered capital and staff have work experience or an education in finance.
Executive Summary:
Auto financing loans are effectively the only way for Chinese consumers to purchase cars, unless they have significant savings or can call on family money. They have been available in China since a pilot auto-financing programme was established by state-owned banks in China in May 1996.
In October 1998, the People¡¯s Bank of China (PBOC) authorised the four largest state banks to undertake auto financing: The Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB), the Agricultural Bank of China (ABC) and the Bank of China (BoC) started schemes. Since 1999 they have been joined by other local commercial banks including the Shanghai Pudong Development Bank. However, under this plan, individual purchasers have to leave the full purchase price of a car on deposit in a bank while paying off the auto loan.
At present only commercial banks in China are allowed to do car financing schemes under strict regulations issued by the central bank of China, the People¡¯s Bank of China.
Additional problem remain determining credit worthiness, the inability to fluctuate interest rates for car loans and the lack of ownership certificates.
Following China¡¯s entry into the WTO the market should become more liberalised with additional encouragements for the banks to enter the field as well as the establishment of car manufacturer ...