Deutsche Leasing, Germany's largest leasing company, is poised to invest 140 million Euros (US$168 million) in China by 2008, in a bid to jumpstart its expansion into the world's fastest-growing major economy.

The German company opened its offices in Shanghai on Friday, the first wholly foreign-owned subsidiary of a European leasing company in China, following Beijing's decision to allow complete foreign-ownership in the sector last March.

"China is the market for our future growth, given its market size and huge potential," said Hans-Michael Heitmuller, board chairman of Deutsche Leasing AG.

The company will invest at least 20 million Euros (US$24 million) by the end of this September, and it's expected to break even by end of the year. Meanwhile, it also expected to expand its presence into other parts of the country in the coming years.

The German company, with a wide range of leasing portfolios which include vehicles, machinery and real estate, will initially cooperate with small and mid-sized European companies in China. By providing investment financial services, the company is expected to help its clients, mainly machinery manufactures, to tap into rising demand in the Chinese market.

China, the world's third largest machinery market, is also the second largest export market outside of Europe for the German machinery-manufacturing industry. China imported about US$8.4 billion of machinery and systems from Germany in 2005.

"Despite being known as a financing alternative in China for 25 years, leasing still plays a limited role in China, and thus offers a great deal of potential," said Heitmuller.

The ratio of fixed asset investment via leasing in China stood at 1.5 per cent in 2004. In comparison, the ratio is currently about 20 per cent in Germany and over 30 per cent in the US.

At present there are about 10,000 leasing companies in China, including some 40 Sino-foreign joint ventures. Multinationals such as Hewlett-Packard, General Electric and Caterpillar have already set up their leasing arms in China as a way to boost sales and increase market share.

"The Chinese government's decision to draw up a leasing law this year will give a boost to the leasing sector," said Lu Qigan, General Manager of Deutsche Leasing.

Beijing is now drafting a leasing law that is expected to take effect this year, according to Lu, whose company was invited to provide recommendations for the law in 2005.

Deutsche Leasing's subsidiary in China, also the first one outside Europe, is part of the company's efforts to expand globally as the European leasing markets have been largely saturated.

Its 13 non-German subsidiaries are expected to account for 20 per cent of its new business by 2009, up from 15 per cent in 2006.

The company, the fifth largest leasing company in Europe, scored 6.1 billion euros (US$7.32 billion) in new business in 2005 and now manages assets worth 25 billion euros (US$30 billion).

(China Daily 03/25/2006 page5)