Vehicle-makers to push automotive credit
(CHANG TIANLE)
05/10/2002
As the director of the consumer credit centre with the Shanghai branch of the Industrial and Commercial Bank of China, the country's largest lender, Chen Mingzhong sees a clear track for car loans in Shanghai."These days, we are granting car loans to a more diversified group of borrowers with a wider range of needs," he said. The government initiated a short-lived pilot programme on car financing among State-owned banks in 1996. However, the plan did not survive. When the government again authorized banks to issue vehicle loans in 1998, the business took off, experiencing sustained healthy growth ever since. Chen's division provides 30 per cent of the 2.3 billion yuan (US$277 million) car loans in Shanghai. The business has surged from some 60 million yuan (US$7.2 million) in 1999 to 500 million yuan (US$60) last year. In the beginning, most of customers were proprietors of private enterprises, who bought cars not only for personal use, but also for business. "As businessmen, they were knowledgeable about lending practices," Chen said. Now he sees more white collar workers on his customers list, as well as celebrities and even new graduates. The vast majority of Chinese vehicle purchases are cash transactions, with about 5 per cent financed through loans. General Motors chairman, John F. Smith Jr, said merely one out of every 100 Chinese owns a car, and only 10 to 15 per cent of the private car owners in China bought their cars using credit, when he attended the APEC-CEO summit last October in Shanghai, home to both Shanghai GM - the largest Sino-US joint venture and GM's China financial services division. This indicates a huge potential in both the car market and the financial service sector. "Every bank sees this as a new opportunity. Competition is becoming very strong," Chen said. Banks have been advertising speedy loan approvals and simple application procedures. As for many foreign auto heavyweights, who already have a manufacturing base in China, lending is more than a push to increase sales, but part of the game they intend to play here. GM, Ford Motor Co and Volkswagen AG are taking steps to establish automotive financing units in China, and hope eventually to move into the car financing arena. General Motors will set up a joint venture in China to provide auto financing services as soon as the government removes regulatory hurdles. People's Bank of China, the country's central bank, has been hammering out rules to allow auto-financing ventures to be set up under the guidelines governing the country's entry into the World Trade Organization.
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