General Motors reportedly launched China’s first auto financing venture on Wednesday to drive growth in a market expected to be the company’s largest this year after the United States.

Reuters said GM’s venture with Shanghai Automotive Industry Corp. has made its first customer loan, beating foreign rivals in a race to enter a largely untapped $US22 billion market.

Volkswagen is still waiting for a licence, while Ford and Toyota have initial approval to start making car loans, the report said, noting that all hope car financing will fuel the next stage of explosive growth in China, especially as car sales slow.

According to Reuters, GM expects that in 10 years, up to half of all Chinese car buyers will be financing their purchases but executives have said the industry needs serious legislative support.

China reportedly has no central credit rating agency, no laws to repossess cars from errant borrowers, and – after just a few years – a swelling pool of non-performing auto loans.

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Christian Weidemann, the venture’s general manager, told the news agency that’s why it takes 10-15 minutes to approve a car loan in the west, and up to 10 days in China. Bankers even physically check on borrowers at their workplaces to verify their identity.

“We don’t want to be trapped like other banks and be faced with losses. Doing a proper job takes some time,” he reportedly said.

The venture between the two firms’ financing units has 500 million yuan ($US60.4 million) in registered capital and will primarily raise funds by borrowing from Chinese banks, Reuters said.

China’s banks reportedly have offered car loans since 1998, but pared back rapidly after bad debt soared, prompting warnings from the Beijing government.

GM executives told Reuters efforts to clamp down on excessive credit have all but smothered the market for now, although it could recover towards the end of the year.

Only 2-4% of car purchases are currently financed through loans, down from 18.5% at the end of last year, Weidemann told the news agency.

Outstanding auto loans stood at 183.3 billion yuan ($22.15 billion) at end-June, about 10% of all consumer debt issued by financial institutions, according to the central bank.

“The last thing we’re going to be is reckless. We’re going to start off slowly and cautiously,” William Muir, global president of credit arm General Motors Acceptance Corp. (GMAC), said.

“We’re going to have a better expense structure than the banks, and we’re going to use that to provide better service,” he told Reuters.

The news agency noted that auto financing has proved a big money spinner for GM in more developed markets in the United States and Europe. GMAC earned a record $860 million in the June quarter, around 64% of total GM earnings.

But China represents a return to basics: selling cars, the report said.

“We kind of wish many more markets around the world were like China,” Muir told Reuters. “This is really the way we like to see General Motors make its money.”

Analysts told the news agency providing credit will not immediately boost sales in a car market that consultant McKinsey expects to be the world’s largest after the United States by 2010.

That’s why GM and its partners reportedly are spending $3 billion to double capacity to 1.6 million units over the next three years, hoping to catch rival Volkswagen, a mid-size player on the global stage but dominant in China, the world’s fourth largest market.

China profits made up around 9% of the $1.34 billion GM made in total in the second quarter, Reuters said.