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-- In recent years, given that enterprises have gradually improved their awareness levels of the financial leasing, the functions of the financial leasing marketplace have been perfect and Chinese construction machinery financial leasing industry has entered a new stage of rapid development. In particular in the background of the monetary crisis, Chinese government has adopted the policy to positively expand demands of the domestic marketplace, which brings opportunities to the rapid development of the construction machinery monetary leasing business. But on the other hand, compared with mature monetary leasing markets in developed countries, Chinese construction machinery financial leasing industry is still in the main stage of development. As a result, the market penetration rate is quite low, which is only about 8%. According to the statics of China Analysis and Intelligence, in 2008, the marketplace scale of Chinese construction machinery financial leasing marketplace is only about three billion USD. The statistics reveals that Caterpillar’s the largest construction machinery producer in the world whose sales amount accounts for over 60% of the global sales amount and over 80% of its sales quantity in developed areas is dealt in the financial leasing.
The penetration rate of Chinese domestic construction machinery monetary leasing is estimated to boost year by year. It is estimated that in 2010, it will be 12% and in 2015, it will reach 25%. The market scale will reach 20 billion USD. Thus, Chinese construction machinery monetary leasing has a substantial development space.
For those construction machinery enterprises with huge scales and sufficient cash flows, setting up their own monetary leasing providers means substantially. Especially in the background of the monetary crisis, bank mortgage amounts can not satisfy the sales demands of fairly a couple of construction machinery enterprises. As a new sales model, to some degree, the financial leasing makes up for this demand. Just since of this, the sales model of the monetary leasing has gained the attention of manufacturers and becomes the new choice for lots of substantial construction machinery enterprises residence and abroad which hope to defend the market beat and the policy impact.
When economy is prosperous, bank credit policy is loose, and the monetary leasing can fully play its function of corporate finance to promote the flourish development of economy. When economy is in depression, the financial leasing not only plays a role of a cardiotonic but also plays its role of promotion. It pushes forward investment and consumption, stimulates the economic development and pours fresh blood into the economic development. The financial leasing is an powerful way to simulate investment and overcome the reduction in investment. To some degree, it can steer clear of being influenced by the fluctuation of national monetary policies. It plays a positive role in the stable development of enterprises and the sustained and stable growth of state economy. Moreover, the financial leasing has the function of accelerating depreciation. After a contract expires, part of leasing equipment will be absolutely overhauled in the second-hand market, which objectively promotes the development of remanufacturing and supports the cyclic development of the construction machinery industry.
For its objects, the financial leasing has a exceptional advantage in promoting the development of medium and modest enterprises. In China, the regular of commercial bank loans in recent years is comparatively high, which not only avoides bank risks but also blocks the development demands of medium and small clients. The mixture of the monetary leasing provides medium or small enterprises with medium and lengthy term loans. In the method of the financial leasing, the ownership of equipment belongs to a lessor, but the use suitable and the usufruct belong to a leaseholder. The current Chinese accounting method stipulates that leasing assets can be incorporated into a leasee company’s fixed assets to extract depreciation. For fairly a number of medium and tiny construction enterprises, this feature can solve the issue of being classified as enterprises with insufficient good quality for the lack of sufficient equipment (fixed assets). And productive bids of projects will not be affected. Moreover, a selection of home business released by monetary leasing corporations can forcefully support medium and small firms to enter the market competition. For example, sale leaseback can support construction enterprises purchase the equipment tenders needed in the procedure of bidding. That is to sell a company’s equipment at scrap value (which doesn’t take component in the construction tender) to monetary leasing organizations. Besides, it raises funds to acquire the equipment needed in the tender and rent the equipment which has been sold to the monetary providers. The organization has been comparatively mature overseas. Enterprises alter physicochemical capital into dollars capital through sale leaseback. The company doesn’t affect enterprises to go on utilizing property and keep the capital fluidity.
For construction machinery enterprises, the financial leasing has four functions as financing, promotion, investment and assets management. Among them, financing and promotion are the most very important. In particular in the existing stage of the national macro-control and the credit crunch, on one hand, the financial leasing can give parent businesses with monetary services by adopting rental instead of selling. It not only avoids the over-reliance on bank credit, but also avoids the unsmooth intermediate links caused by too a great number of stocks, which helps accelerate the flow of enterprise capital. On the other hand, the financial leasing can enlarge the market of parent companies’ products and strengthen the market competitiveness. Meanwhile, as the parent organization of a financial leasing corporation, a manufacture enterprise can occupy partial profits of bank interests.
The overall prospect of Chinese construction machinery financial leasing business is good. But according to the statistics of China Analysis and Intelligence in July of 2009, the operational status of every single enterprise in Chinese construction machinery financial leasing business is not the same. Some enterprises like Caterpillar, the international giant in the construction machinery business, take a number of preferential measures in Chinese construction machinery monetary leasing business in 2009: prior to 2009, their monetary leasing organization necessary five% of deposit following entering 2009, the margin-cost-free policy is carried out the commission charge is canceled 1-year construction machinery insurance is provided to their clients in the financial leasing small business. As a result, their organization develops prosperously.
Having said that, in some providers, the procedures for the monetary leasing online business are complex and the total leasing expenses are greater than bank mortgages immediately after the total. Therefore their monetary leasing company in Chinese construction machinery financial leasing business has declined or even been canceled. The bank mortgage organization replaces the market space left by the financial leasing business.
Source: China Study and Intelligence
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