are approved.
Gao Chuanjie, director of the central bank's Non-Banking Financial Institution Supervision Department, said relative departments are reviewing the draft of management methods on auto financial companies - a foundation stone for the development of the country's specialized auto financing business.
Management methods must go through all legal procedures but would be put into practice as soon as possible, Gao said.
Xu Zhendong, a senior researcher with the International Financial Research Institute under the Bank of China, said: "The time is ripe for China to set up specialized auto financing companies, as more and more affluent people are beginning to buy cars."
Figures from the National Bureau of Statistics reveal that China produced and sold about 1.06 million cars respectively last year - an increase of 52.8 percent. It marked a leap of 50 percent over the previous year.
By the end of last year, the outstanding amount of loans for car consumption reached 110 billion yuan (US$13.3 billion).
During the first three months of this year, loans worth 20 billion yuan (US$2.4 billion) were issued to car consumers.
Experience from developed countries suggests that demand for vehicles will speed up when the country's per capita gross domestic product reaches US$1,000.
China's per capita GDP reached that level last year.
A price war, which started in the past few years, has lowered the average car price to a relatively reasonable level, he said.
"China's auto financing market has great potential," he said.
Foreign auto giants such as Ford and General Motors have already shown a strong interest in entering the market.
A spokeswoman of General Motors (China) Group said the company is "very anxious to provide auto financing to Chinese customers to boost sales."
Ford Motor Credit Co and GM Acceptance Co - the financing arms of Ford and General Motors - have already applied to the central bank to set up car-financing branches in China.
Germany's Volkswagen Group, the largest carmaker in China, has also filed applications with the central bank.
But Jia Xinguang, chief analyst of the China National Automotive Industry Consulting and Development Corp, said many problems remain for car financing.
The biggest obstacle is the lack of a consumer credit rating system in China, he said.
The country needs to map out a new automobile consumption policy to spur domestic demand further.
Prices for automobiles may have dropped but fees and taxes for consumers remain too high, he said. Fees and taxes for automobile consumption in some Chinese provinces accounted for about 50 percent of auto prices.
This was higher than a 15 percent value-added tax imposed in Germany, a 10 percent consumption tax and purchasing tax in Japan and a 6 percent sales tax in the United States.
(China Daily April 14, 2003)
