
China Raises Capital Limit for Consumer Finance Firms in Tightened Financial Sector Control
China tightens regulations on consumer finance, raising capital limits for non-bank firms, aiming to control rapid non-bank debt growth and stabilize the financial sector.

China has recently introduced new regulations impacting non-bank financial firms that offer small personal loans. The National Financial Regulatory Administration announced on Tuesday that these measures will be enforced starting April 18, 2023. The new rules state that companies providing consumer loans, excluding those for real estate and automobile purchases, must have a minimum registered capital of 1 billion yuan ($139 million). This represents a significant increase from the 2014 requirements, which triples the previous minimum amount.
Investor Criteria
Under the new guidelines, investors in consumer finance firms are categorized as main investors and general investors. Main investors are now mandated to hold a stake of at least 50% in these companies. Furthermore, financial institutions acting as main investors are required to possess total assets of no less than 500 billion yuan ($69.45 billion) by the conclusion of the latest fiscal year. Likewise, non-financial institutions serving as main investors must demonstrate operating incomes of at least 60 billion yuan ($8.3 billion) in the most recent fiscal year.
Background and Impact
China's recent efforts to curb the rapid expansion of non-bank debt, particularly from shadow banks operating outside the traditional banking system, reflect the nation's commitment to financial stability. These measures come at a time when the country's economic growth has noticeably decelerated, exerting pressure on the credit quality of the broader Asia-Pacific region. In fact, Moody's downgraded China's government credit ratings from stable to negative in early December. The ratings agency cited concerns that Beijing's initiatives to support the financial sector could weaken its fiscal, economic, and institutional resilience.
National Economic Targets
Moreover, during the "Two Sessions" meeting earlier this month, China announced a GDP growth target of "around 5%" for 2024. Additionally, the issuance of "ultra-long" special bonds for major projects was revealed, signaling the government's commitment to infrastructure and development.
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