(Yicai) Sept. 23 -- China has issued updated regulations governing financial leasing companies, jacking up the minimum ownership stake for major investors and allowing big overseas manufacturers to become shareholders, with the aim of bolstering governance, accountability, and risk management.

The largest investor in any financial leasing firm will need to own at least 51 percent, up from 30 percent previously, according to the revised administrative measures issued by the National Financial Regulatory Administration on Sept. 20 and coming into effect on Nov. 1.

This higher requirement will help to strengthen shareholder responsibility, improve the efficiency of corporate decision-making, and prevent governance failures due to overly dispersed equity ownership, according to an NFRA official. It is also aimed at preventing shareholders from circumventing the rules or manipulating firms through secret deals or proxy holdings, he added.

In fact, to address concerns about major shareholders improperly interfering in the management of financial leasing companies, the revised regulations include further checks on corporate governance, shareholder obligations, and related party transactions.

Under the new rules, the minimum registered capital for financial leasing firms will also be increased 10-fold to CNY1 billion from CNY100 million (USD141.9 million from USD14.2 million).

Furthermore, the regulations expand the types of entities allowed to invest in financial leasing firms to include large foreign manufacturing enterprises and state-owned capital investment and management companies so as to promote the high-level opening-up of the financial sector.

The financial leasing industry has grown rapidly in China, particularly in sectors such as infrastructure and heavy equipment. Players in the industry had total assets of CNY4.18 trillion (USD593.2 billion) at the end of last year, up 10.5 percent, with leased assets of CNY3.97 trillion, a 9.3 percent increase, according to the China Banking Association.

Allowing big overseas manufacturers to sponsor financial leasing companies reflects China's efforts to encourage major makers of leased products to become shareholders, demonstrating China’s steady approach to financial opening up, according to a report by China Lianhe Credit Rating.

To improve risk management by preventing reckless expansion, the new rules introduce a series of measures, such as requiring firms to maintain a leverage ratio of at least 6 percent and a financial leverage multiple not exceeding 10 times.

Editor: Tang Shihua, Futura Costaglione