Bank of Communications today set up a two-billion-yuan (US$273 million) leasing unit in Shanghai.

BoCom Financial Leasing Ltd is the second leasing firm in China wholly owned by a domestic bank.

The leasing firm will offer financial leasing to industries including aviation, shipping, manufacturing and infrastructure.

"The financial leasing unit is a key step in BoCom's aim to build itself into a comprehensive financial holding company," the bank said in a statement yesterday. "The initial structure as a financial holding company is completed with the set-up of the leasing unit."

The Shanghai-based bank has set up units in leasing, fund managing, trust, insurance and investment banking business besides its traditional lending business.

China lowered the capital requirement for domestic financial leasing firms from 500 million yuan to 100 million yuan in February, seeking to nurture them in an industry that foreign investors dominate.

Chinese banks were forced to quit the business in 1997 amid the Asian financial crisis.

Expansion into leasing will help make banks more competitive and enlarge their client base, the banking regulator said.

Industrial and Commercial Bank of China opened its wholly owned financial leasing company in November as the first bank to wholly own a leasing unit.

China Minsheng Banking Corp has also won approval to step into the market in the form of a joint venture, the Beijing-based bank said in October.

The financial leasing industry has been in China for two decades but is yet to take off.

The country had 12 financial leasing firms at the end of 2006 with a combined net profit of 130 million yuan. The total face assets topped 14.2 billion yuan with debts of 11.2 billion yuan.

China opened its financial leasing industry to global competitors as part of its agreement to join the World Trade Organization in 2001.

Financial leasing firms can undertake yuan and foreign currency denominated leasing operations, including offering term deposits.

(Shanghai Daily December 28, 2007)