China's banking watchdog published draft rules for the establishment of consumer finance firms on Tuesday, as part of government plan to encourage domestic consumption and support economic growth. The proposed companies will provide personal loans to finance purchases of consumer durables, in the latest measure by Beijing to promote consumption following a series of subsidies on purchases of goods from cars to televisions.
Rising incomes and rapid urbanisation have underpinned steady growth in Chinese consumption in recent years, but the country's flimsy welfare net means households still save about 30 percent of their incomes.
The consumer finance firms will be allowed to issue bonds and borrow from the interbank market to raise money, subject to regulatory approval.
The companies, which will have a minimum registered capital of 300 million yuan ($43.96 million) or an equivalent amount in foreign currencies, will not be allowed to accept deposits as a source of funding.
The maximum outstanding value of loans extended to consumers will be limited to five times their monthly income, according to the draft rules.
Both domestic and overseas companies will be permitted to invest in the consumer finance firms, providing they meet a series of standards, including holding at least 80 billion yuan in assets.
The draft rules were posted on the website of China Banking Regulatory Commission.

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