New doors opening for consumer finance firms

The CBRC also lifted regional restrictions on consumer lenders, allowing them to establish outlets in other administrative regions to achieve economies of scale.

Ten cities including Shenyang, Nanjing, Hangzhou and Chongqing have been added to the list of places that may conduct pilot programs. The total number of pilot cities now stands at 16, including the first four approved in 2010.

Moreover, qualified financial institutions in Hong Kong and Macao may establish consumer finance companies in Guangdong province.

The draft also stipulates that consumer finance companies may accept deposits held by subsidiaries of the shareholding companies and the stakeholders themselves, further expanding the financial resources available to the companies.

These small lenders have been hampered by costly, limited financing channels such as borrowing among themselves or on the interbank market, or issuing bonds.

Consumer finance companies run lower risks than banks since they provide small loans to consumers. At the same time, they are a drive for the domestic spending that China urgently needs, said Wu Xiaoqiu, a finance professor at Renmin University,