China's leasing industry to continue to flourish, says Fitch Ratings

China’s leasing industry is set to to continue to grow strongly in 2018 and refinancing demand is forecast to jump 85 percent year on year, Fitch Ratings said.

The expected robust momentum is attributed to a strong increase of leasing assets, according to the rating agency.

“We believe that the leasing sector will remain promising as it serves the real economy directly and will win support from  policy makers,” said Jonathan Lee, senior director of non-bank financial institutions in Asia Pacific at Fitch during the 2018 China Credit Conference held yesterday in Shanghai.

But Fitch cautioned that because of the rising need for capital and tightening liquidity in the market, leasing companies will face higher funding cost and this may impact smaller-sized or weaker players in the industry. 

Fitch predicts that offshore bond issuing from lessors may increase this year but the scale might be smaller than that raised onshore.

Chinese leasing firms raised US$33 billion from the capital market by issuing onshore bonds last year, more than doubling the number in 2016, according to industry data.

Funds from offshore bond issuance in 2017 were par on par with those raised in 2016 at US$9 billion while onshore asset-backed securities in the leasing sector jumped from US$17 billion to US$22 billion last year.

Fitch said that financial leasing service providers will benefit from parent banks’ implicit funding support, while independent lessors such as Far East Horizon Ltd, Fenghui Leasing Co Ltd and Lionbridge Financing Leasing (China) Co Ltd may be in an unfavorable position due to weak business, small number of clients and not-so-strong funding capabilities.