(Yicai Global) June 28 -- China's domestic listed companies have actively forayed into financial leasing. Increasing product marketing channels and creating new areas of business growth are the main reasons, insiders told Yicai Global.

At least 12 listed companies have announced plans to set up or take stakes in the finance leasing businesses since the start of this year, Yicai Global data show. This brings the total number of listed companies engaged in the sector in China to over 300.

A financial lease is a means of renting to buy, where a leasing company buys an asset for its user and then rents it to the user for an agreed period.

"There are only two purposes for listed companies to set up financial leasing businesses: those with a manufacturing background aim at product promotion, while others look for new areas for business growth," Li Siming, chairman of the board of JC International Finance & Leasing, told Yicai Global.

"The penetration rate of the leasing industry in China is still not high and there is a great potential for future development, and this excites the interest of listed companies," said Luo Xiaochun, president of Guiyang GYB Financing Leasing. "And the profitability of these financial leasing businesses will be very rewarding if a full play is given to financial leverage," he added.

However, there are also companies that exploit the emerging field to "rake in money" and set up shell companies to sell at high prices in the future, Luo noted.

Financial leasing is a new way of product marketing for manufacturers of industrial products. Zoomlion Heavy Industry Science and Technology based in central Hunan province is an apt illustration of this proposition. It, Jiangsu province-headquartered XCMG Group, and other large construction machinery makers have set up their own financial leasing companies to market their wares.

Zoomlion's sales of its heavy equipment products through chattel mortgages and financing leases reached CNY1.70 billion (USD257 million) and CNY2 billion to make up 9.6 percent and 11.4 percent of the segment's total revenue, respectively, its annual report for last year shows.

The subject matters of leases have also been shifting in recent years. In addition to typical traditional items such as aircraft, ships, machinery and equipment, special subjects such as patents, trademarks, software, and copyrights, and even intellectual property rights to cows, plants and other biological assets have also emerged.

For instance, Sunsea Telecommunications based in southeastern China's Guangdong province posted a statement in May saying that  its financial leases covered its production equipment and patents it itself holds.

Hangzhou-based nursery and landscaping concern Bluesky Landscape announced its plan last July to ply the financial lease business for its proprietary plant strains under a corresponding contract signed with Tianjin financing firm Far Eastern Horizon.

The leasing of intangible assets is still uncharted territory in China, and caution is thus the watchword with some, Luo advised. For example, the greatest risk to a dairy cow is disease or death, but this may be controlled through insurance.

Editor: Ben Armour