Laws of the People's Republic of China

the People's Bank of China, China Banking Regulatory Commission

Order of the People's Bank of China, China Banking Regulatory Commission

No. 2

The Measures for the Management of Auto Loans, 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 as of October 1, 2004.

Zhou Xiaochuan, the President of the People's Bank of China

Liu Mingkang, the Chairman of the China Banking Regulatory Commission

August 16, 2004

Measures for the Management of Auto Loans

Chapter I General Provisions

Article 1

With the view of standardizing the management of auto loans, preventing risks in auto loan business and promoting the sound development of auto loan business, the present 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.

Article 2

The term "auto loan" as mentioned in the present Measures refers to 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, dealers and institutions.

Article 3

The term "a lender" as mentioned in the present Measures refers to a commercial bank or an urban and rural credit cooperative set up lawfully within 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 refers to a non-bank financial institution with the approval for engaging in auto loan business.

Article 4

The term "a personal auto" as mentioned in the present Measures refers to an auto purchased by a borrower through an auto loan not for the purpose of profit making; "a business auto" refers to an auto purchased by a borrower through an auto loan for the purpose of profit making; "a second-hand auto" refers to an auto whose ownership is changed, with the formalities for ownership transfer handled according to law, during the period from the completion of motor vehicle registration formalities to the day that is one year before its scrapping as specified.

Article 5

The interest rate on auto loans shall comply with the provisions on loan interest rates as 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 dealers may not be longer than one year.

Article 7

Both the borrower and the lender shall abide by the principles of equality, voluntariness, honesty and faith-keeping.

Chapter II Auto Loans to Individuals

Article 8

The term "an auto loan to an individual" as mentioned in the present Measures refers to the loan granted by a lender to an individual borrower for the purchase of an auto.

Article 9

When applying for an auto loan, an individual 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, settled and particular dwelling place and full capacity for civil conduct;

(3)

having stable source of legitimate 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 as provided herein; and

(6)

other requirements as specified by the lender.

Article 10

When granting an auto loan to an individual, the lender shall synthetically take following factors into account and decide the amount and term of, interest rate on, and methods of repayment of the principal and interests of the loan:

(1)

the borrower's credit grade as assessed by the lender;

(2)

the guarantee of the loan;

(3)

the performance and purpose of the auto purchased; and

(4)

the development and the supply and demand situation of the auto industry and market.

Article 11

The lender shall establish a credit record on each borrower which shall contain:

(1)

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

(2)

the certificate certifying the income level and the 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, the interest rate on and guarantee for the loan;

(5)

records of urging the payment; and

(6)

other materials as may be necessary for credit risk prevention.

Article 12

In the case of a loan to individuals granted for the purchase of a business auto, the borrower's credit record shall, besides 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 Dealers

Article 13

The term "auto loan to a dealer" as mentioned in the present Measures refers to the loan granted by a lender to an auto dealer for the purchase of autos and/or auto parts and components.

Article 14

When applying for an auto loan, the auto dealer must meet the following requirements:

(1)

having an enterprise juridical person business license and annual review certificate checked up and issued by the administrative department for industry and commerce;

(2)

having an auto sale agent certificate issued by the auto manufacturer;

(3)

not exceeding 80% of the balance sheet ratio;

(4)

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

(5)

there being no major acts of non-compliance or no records of bad credit on the part of either the dealer, its senior officials or its customers of whom the dealer handles the application for the loan on behalf; and

(6)

other requirement as may be specified by the lender.

Article 15

The lender shall establish and promptly update the separate credit record on each dealer borrower, which shall contain:

(1)

the title, legal representative and business place of the dealer;

(2)

copies of business licenses and certificates;

(3)

the conditions concerning the insurances bought by the dealer and the commercial credit and finance it;

(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 as may be necessary for credit risk prevention.

Article 16

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

Article 17

The lender shall regularly inspect the dealer's credit by regularly checking the dealer's inventory of autos and auto parts and components and analyzing the dealer's financing statements, and adjust the dealer's credit grade and the inventory-checking frequency in the light of the result of such inspection.

Chapter IV Auto Loans to Institutions

Article 18

The term "auto loan to an institution" as mentioned in the present Measures refers to the loan granted by a lender to a juridical person and other entity (hereinafter referred to as an "institution borrower") who is not an auto dealer for such institution's purchase of autos.

Article 19

When applying for an auto loan, the institution must meet the following requirements:

(1)

having an enterprise juridical person business license or an institution juridical person certificate or any other legal certificate, as issued by the authorities in charge of enterprise or institution registration, certifying the qualification of the borrower to be a juridical person:

(2)

having legitimate 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 as provided herein;

(4)

there being no major acts of non-compliance and no records of bad credit; and

(5)

other requirements as may be specified by the lender.

Article 20

The lender shall establish a separate credit record on each institution borrower pursuant to the provisions of Article 15 herein 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 leasehold operation, the lender shall supervise the assessment manner of residual value by the borrower and prevent the risk to the lender caused by over-valuation of the residual value.

Chapter V Risk Management

Article 22

The amount of an auto loan granted by the lender 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 as in the preceding paragraph means, in the case of a new auto, the actual transacted 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 second-hand auto, the actual transacted 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, records of credit and etc.; the credit grade of a dealer or institution borrower shall be determined on the basis of their credit record, 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 provide mortgage for the auto purchased or to provide other effective guarantee.

Article 25

The lender shall either directly accept applications for auto loans or entrust such acceptance to a designated dealer, perfect the system for separation of credit examination and granting, and strengthen the examination before granting and the tracking and payment-demanding after granting.

Article 26

The lender shall set up an information database on the second-hand auto market and a residual value assessment system of second-hand autos.

Article 27

The lender shall establish an auto loan classification monitoring system in the light of loan amounts, distributing areas of the loans, borrowers' financial positions, auto brands, mortgages and guarantees, make regular inspection and assessment on risks of different types of auto loans and promptly adjust the risk grades of different types of auto loans according to the results of such inspection and assessment.

Article 28

The lender shall establish a warning and monitoring system on auto loans, and 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 classification disposal system on bad loans and a loss provision system on deliberate loans 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 on auto loans into its credit registration and consulting system and establish a system for information exchange with other lenders.

Chapter VI Supplementary Provisions

Article 32

Where any lender violates any provision of the present Measures when conducting auto loan business, China Banking Regulatory Commission and its agencies detached have the right to impose punishment on the lender and persons concerned according to the provisions of the Law of the People's Republic of China on Banking Regulation and Supervision and other relevant provisions. The People's Bank of China and its branches may make suggestions to China Banking Regulatory Commission and its agencies that they conduct supervision and inspection over irregular acts of lenders engaging in auto loan business.

Article 33

Loans granted by the lender 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 the present Measures shall be remain with the People's Bank of China and China Banking Regulatory Commission.

Article 35

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