China Streamlines Financing Backed by Movable Assets

What’s new: China will unify the country’s dispersed registration system for movable property and rights used for loan pledges in a further effort to bolster financing support to small and medium-sized enterprises, the State Council said.

Registrations of movable assets and rights-backed collateral — such as production equipment, raw materials, accounts receivable, deposits and financial leases — will be collected by the central bank starting Jan. 1 to unify oversight of such assets, the cabinet said.

Unified registration will allow financial institutions to better monitor companies’ movable asset and rights-backed collateral and encourage them to lend more to businesses, the cabinet said.

Why it matters: Analysts see the change as a significant step for China to bolster movable assets-backed financing, a key funding channel for smaller enterprises.

Companies have registered their movable assets and rights used for loan pledges with different government agencies without unified oversight. The scattered registration system discouraged financial institutions from issuing loans to many smaller enterprises because of risk concerns over the pledges, experts said.

Movable assets such as accounts receivable and inventories make up nearly 70% of the assets of small and medium-sized enterprises. But commercial banks often prefer real estate for loan pledges.

The unified registration system is crucial for financial institutions to develop a full picture of movable property and rights information and enhance their readiness to provide pledge financing to enterprises, the cabinet said.

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Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bobsimison@caixin.com).

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