Morgan Stanley, China Fortune plan JV

Morgan Stanley and China Fortune Securities Co Ltd plan to set up a financial leasing joint venture, to enter a sector that has been growing by at least 50 percent annually in China.

Jiang Songtao, vice-president of State-owned INESA Holding Group, parent of China Fortune Securities, made the comment on Wednesday on the sidelines of a conference in Shanghai.

However, he didn't give details on where and when the new venture will be set up.

Financial leasing is a type of leasing where a lessor buys and owns an asset during a lease and a lessee pays to use that asset and has the option of buying the asset when the lease expires.

"We are looking closely at the country's financial leasing industry and will enter the sector in the near term," Jiang told China Daily.

China Fortune Securities is also known as Huaxin Securities.

Jiang's comment came after the two sides formed a securities joint venture last year, Morgan Stanley Huaxin Securities Co Ltd, that focuses on underwriting yuan-denominated stocks and bonds for small-cap companies in China.

Huaxin Securities holds a two-thirds stake in the 1-billion-yuan ($159 million) securities venture, with Morgan Stanley holding the remainder. They also jointly run an asset management venture, Morgan Stanley Huaxin Fund Management Company, which was founded in 2008.

Asked how the securities venture fared over the past year, Jiang said it is "gaining momentum and will see an uptick this year".

He added the venture would benefit from Morgan Stanley's global network, brand and talents.

Morgan Stanley's venture into financial leasing underscores the sector's explosive development in China over the past few years.

The industry's assets grew about 25-fold over the past five years. As of the end of 2011, the nation had more than 260 financial leasing companies with a contract balance of more than 700 billion yuan, according to the Ministry of Commerce.

Last year, 17 financial leasing companies set up by banks earned about 6.4 billion yuan in profit, up 78 percent year-on-year, according to the China Banking Regulatory Commission. The sector as a whole received 98 percent of its due rentals, indicating its assets are in good shape.

The rise of the financial leasing sector benefits from strong demand from small and medium-sized enterprises.

In China, the banking industry is reluctant to lend to SMEs, which typically have few assets. SMEs are more likely to get funded through financial leasing as leasing companies can take back the leased asset if they fail to find a lessee.

gaochangxin@chinadaily.com.cn