China sets higher bar for consumer finance companies

BEIJING (Reuters) -China has changed the rules for consumer finance firms for the first time in a decade, setting a higher bar for non-bank financial businesses providing small personal loans in the world’s second-largest economy.

The stricter measures, which will take effect on April 18, come amid a regulatory tightening across China’s financial sector, despite the economy’s wobbly post-COVID recovery, and analysts see them as potentially deterring new players.

The revised rules, published by the National Financial Regulatory Administration (NFRA) after a one-month consultation ended mid-January, are in line with the proposed amendments.

Under the new regulation, firms that provide consumer financing for other than home and car purchases must have a minimum registered capital of 1 billion yuan ($139 million), more than three times the minimum 300 million yuan required under 2014 regulation.

A major investor in a consumer finance firm must also hold a stake of at least 50%, up from 30% previously.

Financial institutions that are major investors must have total assets of at least 500 billion yuan by the end of the most recent fiscal year, up from 60 billion yuan previously.

A non-financial major investor, meanwhile, needs to have at least 60 billion yuan in operating income in the most recent fiscal year, double the previously required number.

($1 = 7.1981 Chinese yuan renminbi)

(Reporting by Qiaoyi Li and Ryan WooEditing by David Goodman and Mark Potter)