On August 23, 2024, China’s National Financial Regulatory Administration (the NFRA) issued a notice regarding the encouragement list, negative list, and project company’s positive list for the business development of financial leasing companies (the Notice).
In accordance with the Notice, it implements a list system for the management of the business of financial leasing companies and project companies, including an encouragement list, a negative list, and a positive list for the business development of financial leasing companies and project company businesses.
Among them, the encouragement list is oriented to national strategic needs and includes important equipment and major technical equipment such as agricultural machinery, wind power and photovoltaic, photothermal power generation, pharmaceutical research and development, ships, and other important equipment in 27 industries, including agriculture, forestry, animal husbandry and fishery, new energy, pharmaceuticals, ships, and marine engineering, in the scope of the encouragement.
The negative list includes “structures, antiques and jades, paintings and calligraphy, desks and chairs, newspaper and book shelves, low-value consumables, and consumer goods (excluding passenger cars),” whereas the positive list for the project companies of the financial leasing companies contains “aircraft (including engines), ships, containers, marine engineering structures, construction machinery, vehicles, computing center equipment, and integrated circuits.”
Comment
According to the NFRA, this Notice is a subsequent document of its Notice on Promoting Standardized Operation and Compliant Management of Financial Leasing Companies issued in October 2023, which aims to “improve the corporate governance and internal control management mechanism, standardize the financial leasing business practices, enhance the effectiveness of financial supervision, and establish a sound regulatory collaboration mechanism”.
The Notice issued in 2023 emphasized content as follows: 1) improving company governance, 2) strengthening internal control and regulation management, 3) finding the entry point to service the real economy, 4) strictly regulating the leasing business, 5) optimizing lease business structure, 6) strengthening leasehold valuation management, and 7) improving the financial supervision effectiveness.
The lists mentioned above are the subsequent measures under the Notice issued in 2023 above in order to “guide the industry to do real leasing and provide specialized and characteristic financial services for the real economy.” For instance, the 27 industries contained in the encouragement list reflect the directions that financial leasing companies are encouraged to support, such as “business model compatible with the manufacture and use of equipment-type assets such as large-scale equipment, large airplanes, new energy ships, first (set) equipment, major technical equipment, integrated circuit equipment, etc.” On the other hand, the items listed in the negative list (e.g., antiques and jades, paintings and calligraphy, etc.) are forbidden to be leased.
The NFRA herein was established on the basis of the previously established China Banking and Insurance Regulatory Commission (CBIRC) in May 2023, and its main responsibilities include, but are not limited to, supervising and managing the financial industry other than the securities industry in accordance with the law, strengthening the institutional, behavioral, functional, penetrating, and continuous supervision, maintaining the legal and sound operation of the financial industry, etc.