• Futures News
• March 1, 2025

Consumer Finance Firms Receive Capital Boost

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The landscape of consumer finance in China is undergoing significant transformation, as evidenced by recent announcements from two notable firms in the sectorOn December 24, CITIC Consumer Finance Co., Ltddisclosed a plan to increase its registered capital from 700 million yuan to 1 billion yuanSimilarly, Sichuan Jincheng Consumer Finance Co., Ltdrevealed its intent to boost its registered capital to 1 billion yuan as well.

This trend of capital increase within consumer finance firms has gained momentum throughout the year, driven by the need to comply with regulatory requirements and bolster financial strengthAnalysts point out that increasing capital not only raises the capital adequacy ratio, thereby enhancing risk management capabilities, but also fulfills the basic thresholds stipulated by regulatory bodies.

Both firms on the same day announced their capital increases

The resolutions from Chengdu Bank's eighth board meeting confirmed its participation in Jincheng Consumer Finance’s capital expansion plan

In response to operational demands, Jincheng plans to raise its capital through converting capital reserves, undistributed profits, and cash contributions from current shareholders, leading to the intended increase to 1 billion yuanChengdu Bank, a significant stakeholder, intends to contribute additional cash, thus continuing its role as the largest shareholder in Jincheng.

Previously, Jincheng attempted to bring in new investors for its capital increase but failed due to insufficient qualified candidates during the selection phase.

CITIC Consumer Finance also disclosed on the same day that it has signed a capital increase agreement with its shareholders, CITIC Financial Holdings Co., Ltd

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and Kingdee Software (China) Co., LtdAccording to the agreement, these shareholders will jointly contribute 300 million yuan, with CITIC Financial providing 210 million yuan and Kingdee contributing 90 million yuanFollowing this round of investment, CITIC's registered capital will also rise from 700 million yuan to 1 billion yuan.

Statistics illustrate that numerous consumer finance firms have raised their registered capital throughout 2023. Notably, Changyin Wuba Consumer Finance obtained regulatory approval in October to increase its capital from 900 million yuan to 1.124 billion yuan, while Haier Consumer Finance similarly raised its capital from 1.5 billion yuan to 2.09 billion yuan, maintained through a conversion of undistributed profits without altering its equity structure.

According to Dong Ximiao, the chief researcher at Zhaolian Financial, adequate capital serves as a key defense against risks, and enhancing capital prowess is pivotal for the stable development of consumer finance companies

Moreover, capital increases enable these firms to broaden their business scale, innovate products, and ultimately deliver better services to consumers.

Seven firms below the minimum registered capital requirement

In March 2023, the National Financial Regulatory Bureau released new regulations governing consumer finance companies, elevating the minimum registered capital requirement from 300 million yuan to 1 billion yuan, alongside increasing the stakeholding requirement for major investors from 30% to a new threshold of 50%. This adjustment means that both Jincheng and CITIC Consumer Finance, upon completion of their capital increases, will meet the revised minimum capital requirements.

Sustaining an adequate capital level is not only a regulatory obligation but also a cornerstone for the prudent evolution of consumer finance institutions

The primary channels for capital replenishment for these firms remain capital increases from shareholders and internal profit accumulationAs regulatory expectations for capital adequacy tighten amidst dynamic business expansion, there has been a noticeable acceleration in capital raising activities in 2023.

Throughout 2023, five consumer finance companies managed to complete capital increases, allowing the total registered capital of consumer finance firms to rise from 66.858 billion yuan to 97.693 billion yuan, a significant increase of 30.835 billion yuan, equating to a growth rate of 46.1%. The overall capital adequacy ratio for these firms improved slightly to 14.30% from 14.01% in 2022.

By the end of 2023, there were 31 consumer finance companies approved to operate by regulatory bodies, including the inauguration of a new institution, Xin Financial Consumer Finance Co., Ltd.

Moreover, following the latest regulatory provisions, seven out of the 31 approved consumer finance companies still fall short of the new minimum capital requirement

This includes firms such as Beiyin Consumer Finance, Shengyin Consumer Finance, Jinshang Consumer Finance, Mengshang Consumer Finance, Xiamen Jinmeixin Consumer Finance, Weipin Fubang Consumer Finance, and Hebei Xingfu Consumer Finance.

Dong Ximiao emphasized that stimulating consumer spending and broadening domestic demand are critical focal points for the economic agenda leading up to 2025. In this context, consumer finance companies play a vital role as specialized financial institutions catering to consumer credit needs, significantly contributing to the growth of consumer finance and enhancing residents' purchasing powerFollowing capital replenishments, these companies will be better equipped to provide consumer loans, thereby promoting consumption more actively.