Sino-foreignleasingcompaniesfacenewopportunitiesByJiangZhongqin“Sino-foreignleasingcompaniesfacenewopportunities”saystheSecretaryGeneraloftheLeasingBusinessCommitteeoftheChinaAssociationofEnterpriseswithForeignInvestment(LBC),Mr.QuYankai.Mr.QuplaysacriticalroleinadvisingonresolvingoverdueleasepaymentsforjointventureleasinginChina.Hehasexcellentinsiderinsightintothedevelopmentofthefinanceleasingindustryinthiscountry.AccordingtoMr.Qu,40Sino-foreignleasingcompanieshavebeenapprovedbyMOFTEC.ThemajorityoftheseforeigninterestshavecomefromJapan.Asurveyof30Sino-foreignleasingcompaniesheldrecentlybytheLBCyieldedthefollowingbreakdown:CountryorRegionPercentageJapanHongKong,MacaoGermanyItalyFrenchU.S.A.SingaporeUnitedKingdomS.KoreaCaimanIslands60.20%10.30%5.90%5.90%5.90%4.40%2.90%1.50%1.50%1.50%Sino-foreignleasingcompanieshaveintroducedmorethanUS$7billionfordomesticfirmssincethespringof1981tilltheendof1998.AccordingtoVice-ministerofMOFTEC,Mr.SunZhenyu,“Followingforeigndirectinvestmentandforeignloanfacilities,financeleasinghasbecomethethirdmostimportantchannelforutilizingtheforeigncapitalfundsinChina.”Sino-foreignleasingcompanieshavekeptleasingobligationrightstoaboutUS$2billionsofar.OftheUS$7billionbalance,almostUS$5billionhasbeenpaidbacktoforeigncreditors.1OftheUS$2billioninleaserentpayables,basedonLBCsstatistics,thetotalprincipalofoverdueleasepaymentsisabout$300million.Mr.Qusaidthattwopointsshouldbeemphasized:First,asfarasthetiming,mostofoverdueleasepaymentsarefromprojectssigned10yearsago.Thereasonthatoverdueleasepaymentsoccurredisthatalongwiththevariationofeconomicsystems,investortitleshavechanged.Thishasresultedinlackofclarityingaugingtheresponsibilitiesofinvestors.Overdueleasepaymentsareananticipatedriskinfinanceleasing.Second,therehasbeenachangeinlegalstructures.10yearsagoChina’seconomicsystemwasunderreformandbasedonaweaklegalsystem.Manylegalareaswereintransitionorimprovingstepbystep.Someforeigninterestsbelievedthatthe“guaranteefromthegovernment”waivedtheneedforanyduediligenceonleasingprojects.Someforeigninterestswerewellawarehowriskytheseprojectswereastheinterestratesonloansforfinanceleaseswererelativelyhigh.Thereisapriceofreforminanycountry.ThepricetheChinesegovernmenthaspaidforreformhasbeenveryheavy.Someforeigninvestorshavealsohadtomakeconcessionstoacertaindegree,tosolveoverdueleasepayments.Thiswasaone-timesituation,duetolegalchange,andwillnotberepeated.Beginninginthe1990s,overdueleasepaymentsbegantoinfluencetheoperationsofSino-foreignleasingcompanies.WithasustainedeffortfromtheLBC,andassistancefromthegovernmentorgansconcerned,PremierZhuRongjitookupthematterpersonallyandtheStateCouncildecidedtochangeforeignloansintodomesticloans,arrangingaspecialRMBloanequivalentofUS$200milliontosolveoverdueleasepayments.“Ofcoursewehavealongwayinsolvingoverdueleasepayments;”Mr.Qusaid.“Inordertomoreefficientlysolveoverdueleasepayments,theStateCouncilhasrecentlyapprovedarrangingalternativespecialRMBloansequivalenttoUS$20millionforprojectswhichhavenotbeendeclared.Atthemeantime,governmentorgansconcernedcirculatedanoticeofcriticismtowardssomecitiesorprovincesthatdidnotdotheirbesttosolveoverdueleasepayments.”Mr.Quemphasizedthatfewoverdueleasepaymentsexistforprojectsbegunafter1990,andSino-foreignleasingcompaniesthatwereestablishedafter1989havelargelyenjoyedsuccessfuloperations.PECInternationalFinanceLeasingCo.,Ltd.withforeigninvestmentfromJapan(IBJ,Marubeni,andYasudaTrustBankingCo.,Ltd.)isonesuchexample.Sinceitsestablishmentin1990,PEChasintroducedmorethanUS$500millioninforeigncapitalfundswithoutanybaddebts.Allloanfacilities,whetherfromJapanesebanksorfromotherforeignbanks,havebeenpaidtoPEConschedule.ThissuccessstorywasreportedbyJapanIndustrialNewsin1995.AnothersuccessstoryisXinDeTelecom,investedinbyGermany’sSiemensandDeutscheTelecom.Inordertosupportthenation’scommunicationsinfrastructure,XinDeTelecomrecentlydevelopedanewformoffinanceleasing,theStructuredParticipatingLease(SPL).TherentpaymentinSPLisbasedonthecashflowoftheproject.Thismakesitbettersuitedtofinancingnewoperatorsandstart-upnewprojects.2BothexpertsinleasingbusinesscirclesandofficialswithregulatoryauthorityvaluethespiritofinnovationexpressedintheSPL.“ActuallyfinanceleasinghasnotdevelopedintoarealindustryinChina,”saidMr.Qu.“Goingbackto1981,Sino-foreignleasingcompanieswereseenonlyasawindowforintroducingforeigncapitalfunds.Thiswindowwillonlyopenwiderinfuture.”Inordertopromoteeffectivedemandinthedomesticmarketandtoacceleratefirms’technologicalrevamping,thePeople’sBankofChinarecentlydecidedthatfirmswithforeigninvestmentcanobtainRMBloansfromdomesticcommercialbanks,solongasforeigncurrencyisprovidedasamortgage,oraLetterofGuaranteefromaforeigncapitalbankisprovided.IthasfinallybeenresolvedthatSino-foreignleasingcompanieswillhavealargerandgrowingroleinprovidingleasingarrangementsfordomesticandinternationalequipment.(theend)3
