Ping An Leasing’s President Fang Weihao: China’s leasing Industry needs to introduce innovations to go through the counter-economic cycle

Time: September 22, 2016 Author: Ping An of China [Size：largemedium small]

From September 20 to 22, the third 'Global Leasing Industry Competitiveness Forum' sponsored by New Finance Union and Amembal & Halladay was held in Tianjin, which attracted participation by eight top leasing industry experts like world-renowned leasing master Amembal and Lou Vigliotti of GE Capital, as well as more than 300 financial institutions.
Fang Weihao, Chairman and Chief Executive Officer of Ping An International Financial Leasing Co., Ltd. was invited to the forum. He gave a keynote speech named Going through Counter-Economic Cycle, and attended the founding ceremony of the International Association for the Promotion of China's Leasing Industry together with Mr. Amembal, leaders of Minseng Financial Leasing and China International Financial Leasing. In the afternoon, Mr. Fang participated in the CEO roundtable forum, discussing the practice of 'Innovative Funding Means - Asset Trading and Securitization' in China together with the experts in the USA.
He proposed the three models for the first time and presented the leasing choices under the counter-economic cycle
The global economic growth slowed down. The leasing industry, which is closely related to the real economy, is unavoidably affected. Unlike the leasing companies in Europe and the USA which have experienced a complete economic cycle, most of Chinese leasing companies haven't experienced the economic downside cycle, without relevant experience in dealing with it.
In his speech, Mr. Fang reviewed the counter-cyclical economic environment, shared the development status of leasing companies in the counter cycle, especially the practice of Ping An leasing as well as a forward-looking prospect, pointed out that the leasing innovation will be characterized by individuals, internet, things and operation. Based on the experience of markets in the USA and Asia, Mr. Fang proposed the three models, analyzing and uncovering the future development strategy of leasing companies in China.
1. Platform period model of leasing economy

Mr. Fang proposed the platform period model of leasing economy through the empirical analysis of cases in Japan, pointing out though the leasing industry might be impacted in the economic downside period, leasing companies, during the cushion period, can adopt corresponding measures and formulate the company's development strategy according to their own judgment of the length of the platform period. If the platform period is believed to last for 1-2 years, a risk-aversion strategy can be adopted; if 3-5 years, a strategy of adjusting the project time frame can be adopted; and if ＞6 years, a strategy of expansion can be adopted.
2. Balanced triangle model of leasing companies

Fang Weihao pointed out that in the counter-economic cycle, risks are of paramount importance. Controlling risks strictly is the emphasis of all leasing companies. Leasing companies should adjust strategies according to their own positioning. Big ones need to give up some benefits in order to maintain the size growth; and small ones can focus on earning income due to limited resources and smaller size pressure.
3. Risk tidewater model of leasing companies

Leasing companies should focus on specialization moderately, and avoid excessive involvement in an industry and excessive segmentation. They need to formulate a common risk management principle, and adjust the bank risk management range and industry risk management range according to the risk level.
Ping An Leasing's innovative practice
According to Mr. Fang, in face of the economic downside pressure and the critical industry period, China's leasing industry needs to introduce innovations to welcome a new industry cycle and facilitate the development in the next stage. He also put forward four standards to measure the accessibility of innovative businesses, i.e. demand, risk, size and cost.
Currently, only 10 of the 17 business lines of Ping An leasing are traditional lines, and the rest 7 are adopting innovations. Mr. Fang elaborated on his practice and thoughts on innovative leasing from perspectives of operating lease and individual lease.
Firstly, for operating lease, Ping An leasing got off to an impressive start in aircraft lease last year. As aircraft assets are special, less likely to depreciate, and relatively safe, they might become a pillar of the Company in business development. At the very beginning of the founding of aircraft subsidiary, Ping An Leasing aimed at the international market, with business teams, customers and things all operated abroad.
Secondly, Individual lease is the trend of the future development, the reasons are as follows. 1) There are 109 million middle-class Chinese, who amass a fortune, with great spending power. 2) With the generation born in 1990s coming to the forefront, the willingness to spend becomes stronger. 3) The consumer finance market is large in China; in particular, real estate and auto markets are a big piece of cake. However, the consumer finance provided by non-bank financial institutions only account for 4%. If leasing companies can offer more scenario-based products and meet customers' specific demand, they will have a great opportunity in the consumer finance market. 4) The rapid rise of the internet in 2012 enabled the development of individual lease at the technical level. China has 700 million internet users, who have developed an online shopping habit. The technologies of IoT and internet provide great potential for leasing companies, which has greatly cut down risk costs and customer acquisition costs.
Mr. Fang Weihao reviewed the development of the leasing industry in China. Years of 2001-2015 constitute 1.0 era of industry lease; in 2016, Ping An Leasing will take the lead in entering 2.0 era in the industry, looking forward to a bigger market. In the counter-economic cycle, China's financial leasing industry can not only go through the counter-economic cycle but also take the lead in the global leasing industry by exploring doing something different from the past