(Yicai) Sept. 23 -- China has optimized its regulations for financial leasing companies to enhance their abilities to withstand risks, including raising the minimum shareholding ratio of major investors and allowing large overseas manufacturing firms to become shareholders.

The minimum shareholding ratio of the largest investor of a financial leasing firm will be raised to 51 percent from 30 percent, according to the new version of the Administrative Measures for Financial Leasing Companies issued by the National Administration of Financial Regulation on Sept. 20 that will take effect on Nov. 1.

Moreover, the minimum registered capital for financial leasing firms was increased to CNY1 billion (USD141.9 million) from CNY100 million (USD14.2 million).

The new, tighter requirement on the shareholding ratio aims to strengthen shareholders’ responsibility, improve corporate decision-making efficiency, prevent governance issues from overly-dispersing ownership, and prevent shareholders from circumventing regulations, improperly controlling firms through proxy holdings, or concealing relations, according to an official at the NFRA.

In fact, to address concerns about major shareholders inappropriately interfering with operations, the new version of the regulations includes further checks on corporate governance, shareholder obligations, and related party transactions.

The new regulations also expanded the types of entities allowed to sponsor financial leasing firms to large foreign manufacturing enterprises and state-owned capital investment and operating companies in order to promote the high-level opening-up of the financial sector.

Allowing large overseas manufacturers to sponsor Chinese financial leasing firms reflects that the government is encouraging major equipment makers to become shareholders of leasing companies, thus demonstrating China’s steady approach to financial opening up, according to a report by China Lianhe Credit Rating.

The new rules also introduced additional regulatory indicators for financial leasing companies to enhance their risk prevention capabilities. For instance, they are required to maintain a leverage ratio of over 6 percent and a financial leverage multiple of below 10 times to prevent blind expansion.

The cumulative assets of China’s financial leasing firms rose 10.5 percent to CNY4.18 trillion (USD593.2 billion) as of the end of last year from a year earlier, according to a report released by the China Banking Association in July. The outstanding balance of such assets rose 9.3 percent to CNY3.97 trillion in the period.

Editor: Tang Shihua, Futura Costaglione