China Mobilizes Non-Bank Financial Firms to Drive Industrial Upgrades

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The National Financial Regulatory Administration

China’s National Financial Regulatory Administration is urging non-bank financial institutions to improve support for businesses that want to upgrade machinery and to back programs that encourage the trade-in of consumer goods, measures that are gaining momentum in China.

The administration’s recently issued notice comes as China’s central bank has established a 500 billion yuan ($70 billion) special re-lending fund to help steer financial institutions toward improving support for technological innovation and transformation.

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China's National Financial Regulatory Administration urges non-bank financial institutions to support machinery upgrades and consumer goods trade-ins, aligning with a new $70 billion fund from the central bank.
Non-bank financial firms are incentivized to back technological innovation and eco-friendly industry transitions through improved funding sources like green finance.
Financial leasing and auto finance companies are encouraged to develop tailored business models, focusing on industry-specific support and promoting energy savings and digital transformation.

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Who’s Who

Insurance Companies: The notice encourages non-bank financial institutions, including insurance companies, to enhance their business models and investment to support intelligent, eco-friendly industrial developments. Insurance companies are part of the targeted entities expected to support the transition and may benefit from green finance options, such as asset-backed securities and special bonds, to optimize funding sources and reduce costs for small and medium-sized enterprises.

Investment Firms: Investment firms in China are being urged by the National Financial Regulatory Administration to enhance their business models to support intelligent and eco-friendly industrial developments. They are encouraged to back technological innovations and transformations, focusing on new business models in industries like aviation, energy, and manufacturing. The firms can receive regulatory support and access to green finance options such as asset-backed securities and special bonds to broaden financing channels and reduce costs for small and medium-sized enterprises.

Leasing Companies: Financial leasing companies in China are being encouraged to explore new business models tailored to industries like aviation, energy, and manufacturing, aiming to aid innovative enterprises with equipment upgrades. They are also urged to support the medical sector by applying for medical business licenses and to explore backing recycling industries. These measures align with the broader goal of promoting intelligent and eco-friendly industrial developments.

Consumer Finance Companies: Consumer finance companies in China are being encouraged to prioritize digitalization and enhance their role in consumer credit. They are urged to provide financial support for smart home appliance replacements and home improvements. This initiative is part of a broader effort to support technological innovation and environmental sustainability. These companies are expected to improve their business models and investment strategies to better aid consumers.

Auto Finance Companies: Auto finance companies in China are encouraged to support municipal transport enterprises in adopting new energy vehicles and provide flexible financial services. Measures include lowering car loan down payments and offering financial products for car replacements. They are specifically urged to enhance financing for used car sales, promoting energy-efficient vehicle adoption and sustainable transportation solutions.

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