Photo taken on July 27, 2022 shows the exterior scene of the venue of the second China International Consumer Products Expo (CICPE) in Haikou, south China's Hainan Province. (Xinhua/Guo Cheng)
BEIJING, Oct. 27 (Xinhua) -- China's consumer finance industry is going to hail a new heavyweight player upon the recent regulatory approval of establishment of the CCB Consumer Finance Co., Ltd., the third one affiliated to large state-owned lenders in the country.
Industry insiders interpreted the approval as the potential resumption of regulatory approval for founding new consumer finance firms, which would boost positive development of the industry.
-- CCB eyes new growth driver over approval of consumer finance firm
Previously, China Construction Bank (CCB), one of the four big lenders in China, posted an announcement saying that it had been nodded by China Banking and Insurance Regulatory Commission (CBIRC) to establish the CCB Consumer Finance Co., Ltd.
With the planned registered capital at 7.2 billion yuan, the consumer finance company will be managed by CCB as a tier-I holding subsidiary in which it intends to contribute six billion yuan to acquire shareholding of 83.33 percent.
By the end of 2021, there were only three licensed consumer finance companies with registered capital in excess of five billion yuan in China and no new one has been approved for establishment since the start of 2021.
Compared with others, CCB boasts competitive advantages in developing consumer finance business in view of its latest semiannual data concerning outstanding credit card loans, growth in net credit card issues and net growth of clients.
By the end of June, CCB had outstanding credit card loans of 910.311 billion yuan, up 1.57 percent from the end of 2021 and its cumulative number of credit cards issued and clients mounted up to 152 million ones and 107 million ones, with net growths in the first six months at 4.38 million ones and 2.33 million ones.
As CCB held, investing in the consumer finance company is an important step to further explore the potential of consumer finance sector so as to bring new growth driver for the bank.
By the end of last year, there were in total 30 consumer finance firms in China and two of them and the CCB Consumer Finance Co., Ltd. are related to large banks such as Bank of China or Postal Savings Bank of China.
-- Many banks queuing for seeking fortune in consumer finance field
Currently, licenses for consumer finance business are deemed as a necessity for banks to dig gold in retail business and many small- and medium-sized banks are queuing up for applying for the licenses.
Dong Ximiao, chief researcher with Zhongguancun Internet Finance Institute, believed that consumer finance firms represent a nationwide license for small- and medium-sized banks to break the operation restrictions over allowed business regions.
For large lenders, consumer finance companies stand for more inclusive business and can complement their existing credit card and consumer loan business, noted Dong.
In a wider scale, however, part of the licensed consumer finance companies founded by banks failed to grow in a gratifying way and introduction of market-oriented mechanisms and suitable business modes is advised for them to shore up performance.
Alongside the approval of establishment of the CCB Consumer Finance Co., Ltd, competition in the sector is likely to intensify but large banks' joining may also help boost healthy development of the sector, said market watchers.
-- Wider gap between industry leaders and followers
At present, China's consumer finance industry is stepping into a phase of rapid development.
As the China consumer finance companies development report (2022) released by China Banking Association showed, consumer finance firms altogether possessed loans of 710.6 billion yuan by the end of 2021, up 44.2 percent year on year and assets of 753 billion yuan, up 43.5 percent year on year.
In the first half of 2022, consumer finance companies generally achieved revenue growth but the gap between industry leaders and followers is widening on and on.
Publicized statistics showed that revenues of Merchants Union Consumer Finance, Mashang Consumer Finance, Industrial Consumer Finance, PSBC Consumer Finance and BOC Consumer Finance from January to June stood at 8.416 billion yuan, 5.701 billion yuan, 4.764 billion yuan, 2.943 billion yuan and 3.14 billion yuan respectively, taking up a rather large part of the gross revenues of the industry.
Su Xiaorui, senior financial analyst with Analysys, an information product, service and solution provider in China, expected the consumer finance firms to further explorations in key areas such as guest obtaining, scene building and ecology crafting to thoroughly integrate consumer finance with the retail business of their shareholder banks.
In future, competition between consumer finance companies will be decided more by the differences in their comprehensive capability and apart from related technologies, diversified capital sources and costs, client quality, revenue level, risk control capability, and compliance capability are all factors to determine their business growth.
What's more, the industry leaders are expected to gain more market share, said market watchers. (Edited by Duan Jing with Xinhua Silk Road, duanjing@xinhua.org)
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