China will allow buyers of new cars to borrow up to 80% of the cost, the central bank reportedly said on Tuesday in rules governing the nascent auto financing industry to curb risks amid a growing pool of sour car loans.
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The People’s Bank of China would limit to five years the maturity of most car loans and strengthen risk control management, it said in rules published on its web site and due to take effect on October 1, according to Reuters.
The rules reportedly comprised the final version of a draft circulated in January and follow the granting of permission late last year for non-financial bodies and foreign firms to enter the business.
Auto makers are hoping car financing will fuel the next stage of explosive growth in the country even as car sales slow, the news agency noted.
General Motors and rival Volkswagen AG are the first two foreign automakers granted approval to operate auto financing companies in China, though they await their formal business licences, the report noted.
Fewer than 20% of new cars sold in China are financed, with large state banks dominating the market, Reuters added.
