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	MEASURES FOR THE MANAGEMENT OF AUTO LOANS

	(Order of the People's Bank of China, China Banking Regulatory Commission (No. 2[2004]), August 16, 2004: The Measures for the Management of Auto Loans, which were adopted at the fifth president's working meeting of the People's Bank of China on March 22, 2004 and at the chairman's meeting of China Banking Regulatory Commission on August 9, 2004, are hereby promulgated and shall come into force on October 1, 2004)


SUBJECT : LENDING; AUTO LOANS
ISSUING DEPARTMENT : PEOPLE'S BANK OF CHINA
ISSUE DATE : 08/16/2004
IMPLEMENT DATE : 10/01/2004
LENGTH : 2,006 words
TEXT :

TABLE OF CONTENTS

CHAPTER I GENERAL PROVISIONS
CHAPTER II AUTO LOANS TO INDIVIDUALS
CHAPTER III AUTO LOANS TO DISTRIBUTORS
CHAPTER IV AUTO LOANS TO INSTITUTIONS
CHAPTER V RISK MANAGEMENT
CHAPTER VI SUPPLEMENTARY PROVISIONS

CHAPTER I GENERAL PROVISIONS

Article 1. These Measures are formulated in accordance with the Law of the People's Republic of China on the People's Bank of China, Law of the People's Republic of China on Commercial Banks and Law of the People's Republic of China on Banking Regulation and Supervision for the purpose of standardizing the management of auto loans, preventing risks in auto loan business and promoting the sound development of auto loan business.

Article 2. For the purpose of these Measures, an auto loan means a loan granted by a lender to the borrower for the purchase of an auto (including a second-hand auto), including auto loans granted to individuals, distributors and institutions.

Article 3. For the purpose of these Measures, a lender means a commercial bank or an urban and rural credit cooperative set up lawfully in the People's Republic of China with the approval of China Banking Regulatory Commission (CBRC) and its agency for engaging in Renminbi loan business or a non-bank financial institution with an approval for engaging in auto loan business.

Article 4. For the purpose of these Measures, a personal auto means an auto purchased by a borrower through an auto loan not for the purpose of profit making; a business auto means an auto purchased by a borrower through an auto loan for the purpose of profit making; a second-hand auto means an auto the ownership of which is changed, with the formalities for ownership transfer handled, after the completion of motor vehicle registration formalities and before one year prior to its scrapping as specified.

Article 5. The interest rates on auto loans shall comply with the provisions concerning loan interest rates promulgated by the People's Bank of China, and the methods for the calculation and settlement of interests shall be determined by the borrower and lender through consultation.

Article 6. The terms of auto loans (including the extension periods) may not be longer than five years, of which, the terms of loans for second-hand autos (including the extension periods) may not be longer than three years, and the terms of loans to distributors may not be longer than one year.

Article 7. Both the borrower and the lender shall observe the principles of equality, voluntariness, honesty and trustworthiness.

CHAPTER II AUTO LOANS TO INDIVIDUALS

Article 8. For the purpose of these Measures, an auto loan to an individual means the loan that is granted by a lender to an individual borrower for the latter's purchase of an auto.

Article 9. Any individual applying for an auto loan must meet the following requirements:

(1) being a citizen of the People's Republic of China, or a resident of Hong Kong, Macao or Taiwan or a foreigner who has successively resided in China for at least one year;

(2) having a valid ID certificate, permanent dwelling place and full capacity for civil conduct;

(3) having stable source of income or legal personal assets sufficient to pay off the principal and interests of the loan;

(4) having a good personal credit,

(5) being able to make the down payment provided herein; and

(6) other requirements that may be specified by the lender.

Article 10. When granting an auto loan to an individual, the lender shall decide the amount and term of, interest rate on, and methods of repayment of the principal and interests of the loan on the basis of:

(1) the borrower's credit grade determined by the lender;

(2) guarantee of the loan;

(3) performance and purpose of the auto purchased; and

(4) the development and supply and demand situation of the auto industry and market.

Article 11. The lender shall establish a credit dossier on each borrower, which shall contain:

(1) the name, address, valid ID certificate and effective contact details of the borrower;

(2) a certificate certifying the income level and credit of the borrower;

(3) the auto purchase agreement, and the type, engine number, frame number, price and purpose of the auto;

(4) the amount, term and method of payment of, interest rate on and guarantee for the loan;

(5) record of demands for payment; and

(6) other materials that may be necessary for credit risk prevention.

Article 12. In the case of a loan granted for the purchase of a business auto, the borrower's credit dossier shall, in addition to the items provided in Article 11 herein, contain the annual reviews on the operation license, depreciation and insurance of the business auto.

CHAPTER III AUTO LOANS TO DISTRIBUTORS

Article 13. For the purpose of these Measures, an auto loan to a distributor means the loan that is granted by a lender to an auto distributor for the latter's purchase of autos and/or auto parts and components.

Article 14. Any auto distributor applying for an auto loan must meet the following requirements:

(1) having an enterprise legal person business license and annual review certificate issued by the administrative department for industry and commerce;

(2) having an auto selling agent certificate issued by the auto manufacturer;

(3) its balance sheet ratio not exceeding 80%;

(4) having stable lawful income or lawful assets sufficient to pay off the principal and interests of the loan;

(5) there being no material non-compliance or no record of bad credit on the part of either the distributor, its senior officials or its customer on whose behalf the distributor handles the application for the loan; and

(6) other requirement that may be specified by the lender.

Article 15. The lender shall establish and promptly update a separate credit dossier on each distributor borrower, which shall contain:

(1) the title, legal representative and business place of the distributor;

(2) copies of business licenses and certificates;

(3) the insurances bought by and the commercial credit and financial position of the distributor;

(4) its loan card (number) issued by the People' Bank of China;

(5) the type, price and purpose of the purchased auto, auto parts and components;

(6) the loan guarantee; and

(7) other materials that may be necessary for credit risk prevention.

Article 16. The amount of a loan granted by a lender to an auto distributor for the latter's purchase of autos and/or auto parts and components shall be determined on the basis of the average inventory of the distributor in a certain period which shall be determined in the light of the distributor's inventory turnover.

Article 17. The lender shall regularly inspect the distributor's credit by regularly checking the distributor's inventory of autos and auto parts and components and analyzing the distributor's financing statements, and adjust the distributor's credit grade and the inventory-checking frequency on the basis of the result of such inspection.

CHAPTER IV AUTO LOANS TO INSTITUTIONS

Article 18. For the purpose of these Measures, an auto loan to an institution means the loan that is granted by a lender to a legal person and other entity (hereinafter referred to an "institution borrower") who is not an auto distributor for such institution's purchase of autos.

Article 19. Any institution applying for an auto loan must meet the following requirements:

(1) having an enterprise legal person business license or an institution legal person certificate or any other legal certificate, issued by the authorities in charge of enterprise or institution registration, certifying the borrower's corporate capacity:

(2) having lawful and stable income or lawful assets sufficient to pay off the principal and interests of the loan;

(3) being able to make the down payment provided herein;

(4) there being no material non-compliance and no record of bad credit; and

(5) other requirements that may be specified by the lender.

Article 20. The lender shall, by referring to the provisions of Article 15 herein, establish a separate credit dossier on each institution borrower, and strengthen the tracking monitoring on credit risk.

Article 21. In the case of a business auto loan granted to an institution engaging in auto leasing, the lender shall supervise the residual value assessment made by the borrower and prevent the risk on the lender that may be caused by over-valuation of the residual value.

CHAPTER V RISK MANAGEMENT

Article 22. The amount of an auto loan granted for purchase of a personal auto may not exceed 80% of the price of the auto purchased by the borrower; that for purchase of a business auto may not exceed 70% of the auto purchased by the borrower; that for purchase of a second-hand auto may not exceed 50% of the auto purchased by the borrower.

The price of an auto referred to in the preceding paragraph means the actual price of the auto (excluding various surtaxes, charges and insurance premiums) or the price published by the auto manufacturer, whichever is lower, in the case of a new auto or; in the case of a second-hand auto, the actual price of the auto (excluding various surtaxes, charges and insurance premiums) or the price estimated by the lender, whichever is lower.

Article 23. The lender shall set up a borrowers' credit rating system and determine each borrower's credit grade with great caution. The credit grade of an individual borrower shall be determined on the basis of his occupation, income level, ability to pay and record of credit; the credit grade of a distributor or institution borrower shall be determined on the basis of their credit dossier, their senior officials' credit qualities, financial positions and records of credit.

Article 24. When granting an auto loan, the lender shall require the borrower to create mortgage on the auto purchased or to provide other effective guarantee.

Article 25. The lender shall either directly accept applications for auto loans or delegate such acceptance to a designated distributor, have a well-established system for separation of credit examination and granting, and strengthen before-granting examinations and after-granting tracking and payment-demanding.

Article 26. The lender shall set up a second-hand auto market information database and a second-hand autos' residual value assessment system.

Article 27. The lender shall establish an auto loan classification monitoring system according to loan amounts, areas of the borrowers, borrowers' financial positions, auto brands, mortgages and guarantees, make regular inspections and assessments in respect of risks of different types of auto loans and, according to the results of such inspections and assessments, promptly adjust the risk grades of different types of auto loans.

Article 28. The lender shall establish an auto loan warning and monitoring system, formulate warning standards and, in the case of any dissatisfaction of these standards, adopt measures such as reappraisal of the credit examination and approval system.

Article 29. The lender shall establish a bad-loan classification disposal system and a deliberate loan loss provision system, and make corresponding loan loss provisions.

Article 30. When granting a mortgage loan, the lender shall assess the value of the mortgage with great caution, pay full attention to possible depreciation of the mortgage, and fix the upper limit for the mortgage rate.

Article 31. The lender shall promptly incorporate the information concerning auto loans in its credit registration and consulting system, and establish a system for information exchange with other lenders.

CHAPTER VI SUPPLEMENTARY PROVISIONS

Article 32. CBRC and its agencies may, according to the provisions of the Law of the People's Republic of China on Banking Regulation and Supervision and other relevant provisions, impose punishment on any lender who violates any provisions therein when conducting auto loan business and on the person concerned. The People's Bank of China and its branches may make suggestions to CBRC and its agencies that they conduct supervision and inspections over irregular acts of lenders engaging in auto loan business.

Article 33. Loan granting for purchase of engineering vehicles, such as bulldozers, excavators, mixers and pumps, shall be handled by applying these Measures mutatis mutandis.

Article 34. The power to interpret these Measures shall be vested in the People's Bank of China and CBRC.

Article 35. These Measures shall come into force as of October 1, 2004. The Measures for Management of Loans for Auto Consumption issued by the People's Bank of China in 1998 shall be annulled as of the same date.