At a session during the China Automotive Industry Roundtable in Shanghai Thursday, industry observers ripped the country for its weak credit system and criticized the policy regulating auto financing.
However, automakers showed their confidence in business - based on the nation's huge market - although the financing arm may face years of non-profit.
"Overall, we are happy (to see the opening-up policy), and it could be more open," said Christian Weidemann, director of Financial Services for General Motors in China.
Weidemann was assigned to lead a new joint venture between General Motors Acceptance Corporation and Shanghai Automotive Industry Corp in financing, which is open to automakers based on regulations launched last November.
Auto giants General Motors Corp, Volkswagen AG and Toyota Motor Corp are the first foreign automakers with licenses from the China Banking Regulatory Commission to provide auto financing on China's mainland.
Operations are expected to launch in the middle of this year.
Weidemann said that the opening-up policy is good news for automakers like GM, and the financing arms would absolutely help the manufacturer sell more cars as China converts from a cash society into a credit society.
However, he criticized certain rules - the lack of permission to open a branch network or subsidiary - and called for further liberalization.
"I think we don't have to push the government at the present time, we are in the process ... the most important (thing now) is to cultivate the market," said Weidemann. "In China, many things are developing quickly ... I will not be surprised that after 10 years the China market is totally different."
Jia Xinguang, chief analyst of China National Automotive Industry Consulting and Development Corp, told Shanghai Daily Thursday that risk is still the biggest challenge for auto financing arms.
"The Chinese big banks control the business, but they didn't do well and created a large number of bad loans," said Jia. "Their operation transfers the risk to others like the insurance firms and they have no risk control and after-sales service, and the whole nation lacks a credit system."
(Shanghai Daily March 12, 2004)