摘自《美国设备租赁协会》行业巡礼专栏 What Lessors Are Saying About China

    China's gross domestic product is among the fastest-growing in the world. As lessors turn their attention to the East, questions and concerns are being raised about the viability of this market for equipment leasing.

    Last November the Equipment Leasing Association conducted its second business development mission to China. According to the mission participants, China has undergone a significant transformation since the first 1987 ELA China mission. Moving to a market-based economy from a centrally-planned economy was just the first noticeable difference from the late 1980s. Yet, the mission delegates also discovered that the infrastructure to support a vibrant equipment leasing industry in China is still imperfect.

    James Beard, President of Caterpillar Financial Services Corporation says, China is going to be a huge market, and is growing too fast and too big too ignore. But there are a host of issues to manage before we can call it a big leasing market.

    These issues, says John Sabroske of John Deere Credit include (1) a lack of a reliable, uniform legal system, (2) a lack of credit information on prospective lessees, (3) a lack of proper financial statements on potential lessees, (4) difficulty in securing collateral, (5) high economic barriers to setting up a leasing company, although that is improving, and (5) unfavorable tax treatment for certain leases.

    These issues were raised frequently by the lessors ELT E-News spoke with. In fact, because of these issues, many foreign lessors have been discouraged from establishing operations in China. Yet, excitement continues to run high because the potential is real.

    So far, China has 39 foreign-funded leasing companies, with their volume of trade totaling nearly $1.6 billion in 2004. It is going to be a huge market for the foreseeable future, adds Beard. And, they are hungry for financing.

    Jonathan Fales of the Alta Group agrees: Yes, China is going to be a big deal eventually. The key word there is eventually.

    Sabroske adds, Leasing will be big in the future in China but isn't now. The only way it makes sense from my perspective at the present time is if you're a captive and can use the structure to increase your equipment and product sales. As a stand-alone economic entity, I doubt that it makes sense.

    The host of issues raised above boils down to one present weakness. While agreeing that it will be a big market, Philip Schultz of Key Equipment Finance, sums it up best: The infrastructure still does not exist in China to support leasing as we know it.
Fales adds, In western Europe and North America, you can write a lease and understand your risks and never meet the customer. Lots of metrics and credit history are available. In China you have none of that. Unless the deal is with a multinational you know very well or a large Chinese company, the risk you are taking is huge. You really need to know your customer in China in a way you might not get to know them in the West.

    Joel Raven of GE Equipment Finance, adds, The financial statements are not governed by any body of rules that provides transparency in financial statements. So you don't know what you are getting.

    Alta's Fales says, So, you need to get to know customers personally and be on the street with them. Meet the CEO, meet the Chairman and see how they are doing business.

    Also, adds Raven, the word leasing as we know of the term as long term financial instruments didn't exist in China until a few years ago. Know that a huge educational process needs to take place to local business owners as to what this really means from the standpoint of rights, responsibilities and obligations the technical aspects. Coupled with a different legal system in China and the judicial system (which he points out are two separate systems) that are relatively undeveloped.

    Raven continues, The ability to enforce the lessee's obligation or repossess is not developed. If the lessee defaults in China, you have to be creative in how you work that account. You now have to try to make it work through restructuring or get equipment back and find a way to redeploy it.

    But, most agree that things are changing. Irv Rothman, HP Financial Services, says The regulatory environment is evolving. For one, a foreign owned company historically wasn't able to get a license to operate without a Chinese partner. But, that's changing. The Chinese are relaxing a lot of these regulatory barriers that have existed.

    Other changes, Rothman notes, include draft legislation clarifying the rights and responsibility of lessors and lessees in order to put more teeth into those default provisions, he says.

    Schultz adds, Issues are being corrected, and it makes sense to. As a country that is acquiring as much production capital as China is, one has to have a means to efficiently acquire capital. And, leasing has traditionally been able to serve that need well.

    In fact, according to the Ministry of Commerce in Beijing, China is going to completely open its leasing industry to foreign investors in the near future. The ministry has recently published a new regulation for foreign investment in the leasing industry, amending the previous provisional regulation implemented in 2001. The regulation was to come into force on a trial basis this month. The moves were made to meet the timetable China pledged to the World Trade Organization.
Still, doing business in China for some time will require acknowledging the multitude of cultural differences. The cultural component is huge. For instance, they calculate interest by the flat interest method. It's not exponentially derived. There are thousands of little differences like that, says Key's Schultz. He adds, Also the Chinese see borrowing for your business as a fundamental weakness. They want to use cash. If they don't have money, they do without. The concept of reinvesting money into your business instead of spending it on equipment just doesn't exist. Historically, the concept of using an asset for a certain period of time, paying for its use and then not owning it, is a foreign concept to them.

    Jonathan Fales of The Alta Group says, That will change as the sons and daughters are adopting western thinking.

    And, you can't grow if you don't exploit points of leverage, adds Rothman, underscoring China's cultural hurdles to overcome.
    In the meantime, brave souls are entering this ever-changing market. Schultz says leasing is not being pushed into China, but rather it is being pulled in. He says, When you see the multinational companies in the China leasing industry, most are captives or serve vendor clients. The vendor clients or captive parents are what will drive our industry into China. They are following equipment sellers.

    GE's Raven agrees that large captives and vendors will be the first successful entries into China leasing. But, still cautions that lessors should expect the ramp-up in building a business in China to take longer than you expect. And he notes that it is not just customers that need to be educated about leasing, but also even the sales people have to be educated about what leasing does. Just to get them to talk about it is a hurdle to overcome sometimes.

    Raven offers some words of wisdom: Lessors will probably enter China and present how they do things. But, once inside, they will have to change. You simply have to adjust your expectations to realities of legal system, the financial system, the credit system, the judicial system and the cultural realities of what is and what isn't acceptable to a customer in China.

    Schultz also encourages lessors to be patient and get to know your customer in China. The opportunities are immense, but don't be fooled by the opportunities. Know what you are doing. Be careful and cautious.

    But all agree that China, regardless of the myriad of hurdles, presents an irresistible opportunity. As ELA President Mike Fleming notes Those companies that enter China now will be so far ahead of everybody else in five or 10 years that the costs of catching up will be dramatic.

    Schultz says of the industry entering China, We are not ahead of the curve or behind the curve. We're working on defining the curve and where it's going to go.

    Rothman adds, The Chinese economy is experiencing a tremendous amount of growth and modernization is happening. All of this will lead to a more worldly environment for commercial enterprise and that, of course, is where leasing will thrive.

    Raven sums up, China is not for the faint of heart. The sheer mass of opportunity over time can be blinding. But, if you don't get a toe hold today, your opportunities may go away from a mind share standpoint.

Note: This year, the Equipment Leasing and Finance Foundation will be funding a study that will take a pragmatic look at making the decision to conduct business in China. Please visit www.LeaseFoundation.org or watch for more information on this study in the Foundation's March 2005 newsletter, Foundation Forecasts.