What Development Stages of Finance Leasing are There in China？

In China finance leasing is a special transaction introduced at special time for special purpose in special form of firm. Special time: the early of 1980s when national economy is so pickle that short supply and extremely short of capital. Reserve of foreign exchange was minus US$ 1.296 billion in 1980 the one year before finance leasing introduced in China. Special purpose: introducing foreign capital funds to purchase equipment for revamping of domestic firms.
Special form of firm: Sino-foreign JV. According to China’s laws, Sino-foreign JV is allowed to raise capital fund at international financing market. Forming a Sino-foreign JV, foreign side shall raise capital fund at international financing market and China’s side shall open domestic leasing market. Special transaction --- finance leasing. As a special transaction, finance leasing combines trade and credit that consists of a comprehensive transaction. Prior that time few people were aware of finance leasing in China.      

In terms of development stages of leasing industry in China, four stages are categories as follow.

I, Rapid growth (April 1981 --- 1987)
Central planning economy system was carried out at this period that government organs were title of economic actions. Though neither credit record nor credit assessment system was available, investors came one after another and domestic partners responses actively.

At this period all aspects, including but not limitation of determination of lease solution, guarantee, even quote of FX , were controlled by government organs. Therefore any lease solution would be liable so long as it was arranged by government organs.

According to statistics from 19 of Sino-foreign JV finance leasing companies at the end of 1987; summarized foreign capital funds introduced thereby was US$ 1.79 billion without any bad debts.
Many banks and trade companies at top world level appear in the list of foreign shareholders of the JV, for example, ORIX, Sanwa Bank, IBJ, Sakura Bank, Mitsubishi Trust Bank, JLCB etc from Japan; GATX from USA; Dresdner Bank AG, HypoVereinbank from Germany, BNP Paribas from French; Italy Commercial Bank from Italy etc. 

II, Straightening (1988 --- 1998)
An Announcement of SPC (Supreme People’s Court) promulgated on June 20 1988 pointed out that government organ shall not longer to be allowed as any guarantor. The Law of Industrial Enterprises owned by Whole People promulgated on April 13, 1988, based on which economic active body of China shall be conveyed from government organ to enterprise.

Alone with economic systems convey, a lease payment arrears in whole business circle emerges very soon. Total amount of lease payment arrears for 24 of leasing companies with foreign investment at that time were US$ 300 million
 
With hard working of leasing association, government organs provided assistance to resolute  lease payment arrears that the Chairman of leasing association announced on August 18, 1988 that the problem of lease payment arrears were finally resolved.

Nevertheless during the 10 years when the leasing industry was in straightening, the development step of leasing business has not stopped. During this period 14 of Sino-foreign JV leasing companies formed and total volume of leasing companies were US$ 4.6 billion

III, Legal framing (1999 to 2003)

Since 1999 legal framing of finance leasing is completed one by one.

（1） Contract Law, effectiveness on September 15, 1999
（2） Accounting Standard for Business Enterprises---Leases, effectiveness on January 1, 2001, revised version of which is Accounting Standard for Business Enterprises 21 --- Leases, effectiveness on February 15, 2006.
（3） Regulation of Financial Institution Lessors was promulgated on June 30, 2006, revised version of which was promulgated on January 23, 2007.
（4） Interim Regulation of Leasing Companies with Foreign Investment was promulgated on September 13, revised version of which is Regulation of Leasing Business with Foreign Investment that was promulgated on March 15, 2006.
（5） Tax Regulations are perfecting

IV, Rejuvenating (after 2004)

In the TAP provided by IFC in 1996, it is emphasized that rejuvenate leasing in China for both domestic and joint venture leasing companies through improving the environment for leasing. Three events happened in 2004 indicate that rejuvenating of finance leasing in China has been realized.

（1） WOFI of finance leasing is opening to the outside world. December 11, 2004 a key man from foreign investment department of MOFCOM announced that from now on WOFI of finance leasing is opening to the outside world. Prior to the announcement, GE and Caterpillar is allowed to set pilot WOFI of finance leasing company.
（2） Pilot finance leasing companies invested by domestic investors. 9 of pilot finance leasing companies are licensed by MOFCOM and STB jointly in December 2004 and 11 of one in May 2005.
（3） Amendment of Regulation of Financial Institution Lessors. Revised version of the Regulation of Financial Institution Lessors is promulgated by CBRC in January 2007 that domestic commercial banks are allowed to enter the business circle of finance leasing. Banks under CBRC are licensed to establish finance leasing companies.