Ten more cities will be added to program.
The China Banking Regulatory Commission, China's banking regulator, said the expansion is part of an attempt to bring more private capital into lending markets. It also said the expansion will meet demand from middle and lower income consumers and boost consumption and private sector participation in China’s finance industry.
The pilot program is under way through consumer finance companies in Beijing, Tianjin, Shanghai and Chengdu. Among the cities getting added are Chongqing, Guangzhou and Qingdao. Non-bank financial institutions with total assets in the previous year of more than US$13 billion and net asset ratios of at least 30% can apply to set up consumer finance companies.
They will be able to lend for purchases of consumer goods but will not provide mortgages or car loans. Access to credit in China is tilted towards large state-owned firms and the government believes that increasing loan facilities for consumers and small businesses is key to building a consumer driven economy. China's household consumption was 34% of GDP in 2011 compared with a global average of 61%. Annual growth in Chinese retail sales peaked at 22% in February 2010 but plunged to just13.4% this August.
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