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China’s Economic Troubles and Equipment Leasing

The importance of financial and equipment leasing became more evident in the last few days, not only in the US but around the world.

China’s economic vows became front page news and toppled financial markets all over the world. The government devaluated the currency and almost admitted that the manufacturing situation in China is much worse than they were willing to admit. The stock market experienced a free fall in China and triggered sell offs all over the world. It has since stabilized a bit but keeps the financial markets nervous and on edge.

China moved aggressively to control the crisis. The government released money to brokerages firms to buy stock and ordered companies not to sell their own stock. New company listing was suspended and the central bank cut interest rates to a record low. They also lowered the amount banks are required to keep as reserve. For a while the plans appeared to be working, but the stock market resumed its decline. The index dropped more than 40% from its peak on June 12, 2015.

As China tries to stabilize its economy the State Council, China’s cabinet, announced measures to accelerate the development of financial leasing so it can serve the real economy better.

This measure came because they believe that financial leasing could ease financing difficulty and financing cost, thus spurring investments in equipment and encourage industrial upgrades.

The Chinese demanded less red tape, no minimum threshold for financial leasing companies “to establish subsidiaries and easier procedures for leasing equipment like ships, farming machinery, medical devices, and aircraft.” As reported by the Business Standard.

The business types leasing is available in China today:

Energy Equipment – Solar power generation, hydropower, natural gas, exploration and transport of oil and natural gas.

High-end Equipment – Vehicle manufacturing, port, warehouses, heavy machinery manufacturing, construction and intelligent equipment.

Rail transport – Local railways, high speed railways, subways and state railways.

Urban Infrastructure – Equipment for water supply, gas, heat, fire prevention and environmental protection.

Science, education – Are priorities in recent years in China.

Culture and health care– Broadcasting and digital TV, modern services, logistics, culture and entertainment

After some wild trading sessions, China’s market stabilized on 8/26/2015 as investors in Asia joined a global stock rally. The market closed up 5.3% (after losing more than 20% in the previous 5 days). Stocks in the US and European markets went up as well.

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