China has decided to allow consumer finance companies to work in the country on a trial basis, hoping to trigger increased private consumption and lift economic growth, the government said.
Consumer credit already exists in China, but consumer finance companies, which the bank regulator now hopes to see established, are a new type of enterprise in the world's third-largest economy.
Domestic and foreign-invested companies will initially be allowed to offer credit on an experimental basis in four major cities including Beijing and Shanghai, the China Banking Regulatory Commission said late Thursday.
The programme will provide more financing services to "promote consumption growth" and effectively use personal spending to drive economic growth, the commission said.
If the pilot programme is successful it will be expanded to other parts of China, the commission said.
Under the rules, foreign and domestic firms that want to set up consumer financing companies must have minimum assets of 60 billion yuan (8.8 billion dollars) and at least five years experience in providing consumer loans.
Loans will be extended to help pay for goods such as washing machines, travel or education. However, borrowers will not be able to used them for purchasing property.
The two other cities involved in the project are Tianjin, a major municipality close to Beijing, and Chengdu in the southwest, the commission said.
China has long sought ways to boost consumer spending as a source of economic growth, and the issue has moved further up the agenda after its export sector took a hit from the global economic crisis.
China's household consumption has been below 40 percent for a number of years, compared with nearly 70 percent in developed nations, as families save heavily due to a limited social security system and high expenses for health and education.
China's economy, the world's third-largest, grew by just 7.1 percent in the first half, compared with double-digit annual expansion between 2003 and 2007.
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