BEIJING, CHINA – MARCH 4: Chinese national flags wave at the Great Hall of the People as the second session of the 14th National Committee of the Chinese People’s Political Consultative Conference (CPPCC) opens on March 4, 2024 in Beijing, China. (Photo by VCG/VCG via Getty Images)
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China has tightened restrictions on consumer finance companies, raising the capital limit for non-bank finance companies that provide small personal loans.
The measures announced Tuesday by the National Financial Regulatory Administration will take effect April 18.
This comes at a time when Beijing is tightening its grip on the financial sector.
The new rules stipulate that companies eligible to provide consumer loans – excluding those for the purchase of homes and cars – must have a minimum registered capital of 1 billion yuan ($139 million). According to Reuters, this is triple the minimum amount previously required under the 2014 rules.
According to the statement, investors of consumer finance companies are divided into core investors and general investors. A lead investor must hold at least a 50% stake.
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 currency, by the end of the most recent fiscal year, the regulator.
According to the NFRA, major investors that are non-financial institutions must have an operating income of at least 60 billion yuan ($8.3 billion) in the most recent fiscal year.
In recent years, China has sought to limit the rapid growth of non-bank debt, particularly that issued by shadow banks that are outside the formal banking system.
The slowdown in the country’s growth has also weighed on the creditworthiness of the Asia-Pacific region as a whole.
Moody’s cut the outlook for China’s government credit ratings from stable to negative in early December as the rating agency, citing Beijing’s relief measures to prop up the financial sector, could reduce its fiscal, economic and financial strength. institutional.
Earlier this month, China set a GDP growth target of “around 5%” for 2024 at the “Two Sessions” meeting and announced the issuance of “ultra-long” special bonds for big projects.
— CNBC’s Evelyn Cheng and Clement Tan contributed to this story.