With Tianjin getting the nod to establish a free-trade zone (FTZ), financial leasing companies can look forward to new opportunities in the coming years.
Tianjin, Fujian and Guangdong are the second batch of regions that will set up such zones, following the path of Shanghai, the State Council announced on Dec. 12.
Apart from some common features, Guangdong is expected to lean toward Hong Kong and Macao businesses, while Fujian will try to attract Taiwan investors. But Tianjin has something different to offer.
Sources within the Tianjin government revealed that the city had submitted two sets of plans on its FTZ. One proposes to set up a larger free-trade zone and the other focuses on having a smaller one, geographically. But there is one thing in common in both the plans: the financial leasing industry will get a major policy boost.
Red tape will be cut in the first place. Tianjin will allow financial leasing companies to register their projects instead of seeking government approval, a policy change that will greatly facilitate the companies’ operations.
According to the plans, Tianjin will lower the registered capital threshold for overseas investors in particular. Currently, foreign financial leasers are required to have a registered capital of US$10 million. If Tianjin’s proposal is accepted, it will become a special advantage against rival Shanghai FTZ.
Of course, some preferential policies that Shanghai FTZ enjoys will be copied by Tianjin. They include easier access to cross-border renminbi use, foreign currency possession and expanded business scope.
What’s more, preferential local policies will be given to financial leasers. These include tax concessions for companies, senior executives and hukou (permanent residence) grants and cheap costs for warehouse use.
Financing lease is seen by top Chinese policymakers, including Premier Li Keqiang, as a business model that provides an excellent platform bridging the capital market and the real economy. Policymakers want to push the development of financing lease in an attempt to solve the capital shortage facing many manufacturers and equipment users.
That wish was spelt out clearly when Li visited ICBC Financial Leasing Co in Tianjin in December last year and said the country needs to develop financial leasing industry faster.
Tianjin has long been a leader in this industry, thanks to its large port capacity and vast land that is suitable for warehouses. A total of 206 financial leasers had their headquarters in Tianjin by the end of last year, accounting for one-fifth of the country’s total. Contract value stood at 575 billion yuan, 27.4 percent of the country’s total.
But Shanghai caught up this year, with its FTZ policy advantages. In just a little more than a year, the FTZ has 57 financial leasing companies. In selection of headquarters, Shanghai China Eastern Airlines finally decided to base its financing leasing unit in Shanghai FTZ, although the company had previously planned to set up the unit in Tianjin.
The deal showed that Shanghai gradually gained some advantages, basically built on the convenience in foreign exchange and cross-border transactions.
Now that Tianjin will have an FTZ, it will also enjoy all currency and policy advantages. Tianjin is expected to regain its status as China’s best place for financial leasing companies to establish their headquarters. Its industrial scale, government support, and financial resources based on good relations with big state-owned companies all make it stand out.
The city is already famous for its aircraft leasing business, and the FTZ aims to boost financial leasing of medical equipment as well.
According to Tianjin government sources, the city is discussing the possibility of setting up several special storage zones in its FTZ for medical equipment leasing.
The business has huge potential. According to a survey released in November, more than 70 percent of China’s medical equipment manufacturers and sellers have plans to use financial leasing to help equipment users to buy their products. As of now, only six percent of these companies have tried such a business model.
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