China's Post-WTO Compliance and the Pending Auto Financing Regulatory Measures

By Wang Yi, Wilkie Farr & Gallagher LLP Washington DC

On December 9 2001 the People's Bank of China (PBOC) announced that upon China's WTO accession foreign non-banking financial institutions would be allowed to establish foreign-invested or joint venture enterprises in auto financing according to "forthcoming" regulations.¹ On October 8 2002, 10 months behind schedule, the PBOC's Department of Non-Bank Financial Institutions issued the Auto Financing Regulatory Measures (Draft for Further Discussion) (hereafter the Regulatory Measures). The comments solicited must be submitted before October 31 2002.² Chinese officials estimate market access rules for foreign auto financing companies will not be released until early 2003. China is consulting with various multinational companies (Volkswagen, Ford, General Motors and Daimler-Chrysler) on the drafting of the regulations. To date, General Motors, Ford and Volkswagen have submitted applications to enter the auto financing business.

At the same time, the central bank has finished its internal amendments on the 1998 Administration of Vehicle Consumer Loans Procedures. The new Auto Loans for Individuals Regulatory Measures will provide specific guidelines on down payments, interest rates, and loan periods, among others. This legislation will decrease the down payment requirement from 30% to 10% of the total purchase value, extend the maximum loan period from five to eight years and will probably reduce the individual loan interest rate to 10% based upon the current fixed rate.