China's financial leasing market is expected to hit 5 trillion yuan (USD 804.6 billion) during the first half of 2016 to become the world's largest, surpassing that of the US, a report here said today.
The number of financial leasing firms surged nearly 45 per cent during the first half of this year to 3,185, and the sector is expected to maintain an annual growth rate of 30 per cent during the next five years, the report on China's financial leasing industry released by the China financial leasing association said.
Financial leasing contracts stood at 3.66 trillion yuan at the end of June, up 14.2 per cent from six months ago, state-run Xinhua news agency reported.
The surge in financial leasing activities is partly fuelled by listed Chinese firms tapping the service for cheap credit, as the 21st China Business Herald reported that listed firms in the telecom, agriculture, pharmaceutical, energy and equipment manufacturing sectors have waded into leasing territory.
The newspaper said that listed firms have increasingly used sale leaseback -- the practice of renting assets sold earlier -- to obtain financing as much as 10 per cent cheaper than bank loans.
Dozens of listed firms have built, acquired or bought stakes in financial leasing firms.
Equipment used as collateral for bank loans can only win companies funding up to 60 per cent of the equipment's book value, according to the news report.
In sale-leaseback, however, funding can reach more than 80 per cent.
About one-fourth of China's financial leasing activities take place in the eastern Chinese coastal city of Tianjin, and its Dongjiang bonded port seeks to spearhead offshore financial leasing using preferential policies for the Tianjin free trade zone.
