Interim Measures of Shanghai Municipality for the Supervision and Administration of Finance Leasing Companies

Interim Measures of Shanghai Municipality for the Supervision and Administration of Finance Leasing Companies

Chapter I  General Provisions

Article 1

With a view to regulating the operations of Finance Leasing Companies within this Municipality, strengthening supervision and administration, preventing and controlling the industry risks, and promoting the sustainable and sound development of the industry, these Measures are formulated in accordance with the Company Law of the People's Republic of China, the Market Access Negative List (2025) issued by the National Development and Reform Commission, the Ministry of Commerce and the State Administration for Market Regulation, the Notice of the China Banking and Insurance Regulatory Commission on Issuance of the Interim Measures for the Supervision and Administration of Finance Leasing Companies (CBIRC G [2020] No. 22), the Regulations of Shanghai Municipality on Regional Financial Supervision and Administration and other relevant laws, regulations, and regulatory rules, and in light of the actual circumstances of this Municipality.

Article 2

These Measures apply to the establishment of Finance Leasing Companies and their engagement in finance leasing business within this Municipality.

Article 3

A "Finance Leasing Company" as referred to in these Measures means a limited liability company or a company limited by shares that is lawfully engaged in finance leasing business (excluding a Financial Leasing Company).

"Finance leasing business" as referred to in these Measures means a financing arrangement whereby the lessor acquires the leased asset from a seller designated by the lessee and leases it to the lessee for use, in consideration of periodic rental payments.

All parties engaged in finance leasing activities shall strictly comply with applicable laws and regulations, uphold the fundamental principles of good faith and fairness, and shall not impair national interests, public interests, or the lawful rights and interests of any third party.

Article 4

The supervision and administration of Finance Leasing Companies within this Municipality shall follow the principles of safety and prudence, standardization and orderliness, and innovation and development, and adhere to the objectives of serving the real economy, preventing and controlling financial risks, and deepening financial reform, so as to drive Finance Leasing Companies to underpin high-quality economic development.

Article 5

The Municipal Financial Regulatory Bureau shall, together with the relevant departments, establish an information sharing and coordinated supervision mechanism for the finance leasing industry in this Municipality, improve the supervision and administration system for local Finance Leasing Companies, study and resolve major industry issues, and formulate relevant policies and measures, so as to effectively strengthen industry regulation, forestall industry risks, and boost industry development.

All districts of this Municipality shall strengthen the organization and leadership over the work related to the finance leasing industry within their respective administrative areas, establish and improve local financial supervision and administration mechanisms, and effectively perform work concerning the prevention and mitigation of financial risks.

Article 6

The Municipal Financial Regulatory Bureau shall be responsible for the supervision and administration of Finance Leasing Companies and their operational activities within this Municipality, and shall undertake duties of formulating detailed regulatory rules, conducting surveys and statistics, organizing relevant risk monitoring, early warning, prevention and disposal, and handling complaints and reports.

The departments responsible for the supervision and administration of Finance Leasing Companies in each district of this Municipality (hereinafter referred to as "district regulatory departments") shall, in accordance with the requirements of the  Municipal Financial Regulatory Bureau, undertake duties such as preliminary examination, information statistics and ongoing and ex-post supervision over Finance Leasing Companies registered within their respective administrative areas. They shall conduct work such as risk monitoring, early warning, prevention and disposal, and handling of complaints and reports, and be responsible for adopting corresponding supervision and administration measures.

Article 7

The Municipal Financial Regulatory Bureau and each district shall, taking into comprehensive consideration factors such as the number of institutions and the asset scale of Finance Leasing Companies within their respective administrative areas, strengthen regulatory capacity, and enhance regulatory capabilities, so as to effectively perform their industry regulatory duties.

The Municipal Financial Regulatory Bureau and each district regulatory department may, as needed, engage third-party professional institutions such as law firms and accounting firms, or external professionals, to participate in daily supervision, and shall incorporate the corresponding expenditures into the annual budgetary arrangements.

Article 8

The Municipal Financial Regulatory Bureau shall be responsible for establishing a supervision and administration information platform for Finance Leasing Companies within this Municipality, carrying out the collection of regulatory information, industry data statistics, and risk monitoring and early warning, strengthening the interconnection and sharing of regulatory information with relevant departments, regularly analyzing and assessing the risk profile of Finance Leasing Companies, proposing risk early warnings and disposal recommendations, and enhancing coordinated ongoing and ex-post supervision over Finance Leasing Companies.

Chapter II  Establishment, Change and Deregistration

Article 9

A Finance Leasing Company shall contain the words "Finance Leasing" in its company name and business scope.

Article 10

To establish a Finance Leasing Company within this Municipality, an application shall be filed with the regulatory department of the district where the Company intends to register. Upon the application passing the preliminary review by the district regulatory department, the latter shall submit the preliminary review opinion and the Company's application materials to the Municipal Financial Regulatory Bureau. Where the Municipal Financial Regulatory Bureau deems, upon review, that the relevant conditions are met, it shall issue an opinion approving the establishment of the Finance Leasing Company.

Article 11

To establish a Finance Leasing Company within this Municipality, the following conditions shall be met:

1. The registered capital shall be not less than 170 million (or its equivalent in foreign currency), which shall be fully contributed in monetary funds, accompanied by a clear and reasonable plan for the actual paid-in of such capital.

2. A wellestablished articles of association shall be in place, and a main internal control system including financial management and risk control shall be formulated.

3. A clear development strategy and a well-defined model for profitability and risk control shall be in place.

4. The shareholders shall be corporate legal persons or other economic organizations that have been established for at least one year, with sound credit standing, free from material violations of laws and regulations, and without any material adverse credit records for the past three years.

5. The capital contributed by each shareholder shall be its own monetary funds, and the source of the capital contribution shall be genuine and legitimate. The major shareholders shall be in sound financial condition and possess capital strength and liquidity strength commensurate with the proposed finance leasing business.

6. The controlling shareholder (or actual controller) undertakes that it will not, directly or indirectly, transfer the equity (or shares) it holds within three years (other major shareholders shall undertake not to do so within one year). Such undertaking shall be specified in the articles of association of the Finance Leasing Company.

7. The proposed directors, supervisors, and senior management personnel shall have sound credit standing, possess the necessary professional background and industry experience, have no record of material violations of laws and regulations, and have no material adverse credit records within the past three years. At least one member of the proposed senior management personnel shall be a professional with expertise in risk control and compliance management.

8. Other conditions stipulated by the state financial regulatory authorities.

Article 12

To apply for the establishment of a Finance Leasing Company within this Municipality, the following application materials shall be submitted:

1. An application for establishment and a registration form for newly established companies;

2. The agreement on shareholders' capital contributions;

3. The articles of association and the main internal control system including financial management and risk control signed by all shareholders;

4. Copies of the original business license (or other proof of corporate status) of each shareholder;

5. The audit report for the most recent fiscal year and the latest financial statements for the most recent period (within three months prior to the date of application) of each shareholder;

6. The company credit reports of the domestic shareholders;

7. The list of proposed directors, supervisors and senior management personnel, along with relevant documents and materials;

8. Copies of the property ownership certificate or the lease agreement for the Company's actual business premises;

9. Where any of the shareholders or their related parties is an institution engaged in financerelated business, a list of such institutions and a brief summary of their business operations for the preceding year shall be submitted; and

10. The shareholders' letter of undertaking.

Article 13

The shareholders' letter of undertaking shall be signed jointly by all shareholders of the proposed Finance Leasing Company, and shall contain the following:

1. All materials submitted for the establishment shall be true, accurate, complete, lawful and valid;

2. Each shareholder shall have a sound credit standing, have no record of any material violation of laws or regulations, and have no material adverse credit records within the past three years;

3. The capital contributed by each shareholder is its own funds with a lawful source; the capital contribution shall be fully paid up at the time of establishment of the Finance Leasing Company or within six months thereafter based on the registered capital to substantively carry out the finance leasing business;

4. The controlling shareholder is prohibited from transferring the equity (or shares) of the Finance Leasing Company held by it within three years and pledging such equity (or shares) or creating a trust over them within three years is likewise prohibited. Other shareholders are subject to the same prohibition for a period of one year;

5. After the Finance Leasing Company is established, it shall strictly comply with the relevant laws, regulations and regulatory rules, operate in a lawful, honest and regulated manner, and submit the relevant data and information in a timely manner; and

6. Other undertakings that the shareholders voluntarily make.

The controlling shareholder of the proposed Finance Leasing Company is encouraged to establish a system for assuming residual risk liability, and to make a written undertaking to assume the outstanding debts of the Finance Leasing Company after its dissolution or upon its cessation of finance leasing business.

Article 14

Where a domestic-funded lease enterprise registered in this Municipality applies to engage in the finance leasing business pilot program, or a foreign-invested Finance Leasing Company registered in this Municipality applies to change its status to a domestic-funded finance leasing pilot enterprise, the matter shall be handled in accordance with the relevant provisions on the domestic-funded finance leasing pilot programs.

Article 15

For any of the following changes to a Finance Leasing Company, the Company shall file an application for approval subject to the same establishment requirements and procedures as those for its initial establishment:

1. change of name or corporate form (excluding the case where the words "Finance Leasing" are removed from the company name and the company ceases to engage in finance leasing business);

2. change of legal representative;

3. change of registered capital;

4. change of business premises to a different district within this Municipality;

5. change of controlling shareholder or addition of new major shareholder;

6. establishment of a whollyowned subsidiary, a holding subsidiary, or a branch; or

7. merger or division.

Article 16

For the following basic matters, a Finance Leasing Company shall undergo initial record-filing upon the first login to the supervision and administration information platform designated by the Municipal Financial Regulatory Bureau. Where the relevant matters change, the relevant information shall be modified and a record-filing for the change shall be made through the same platform within five working days after completing the registration (or record-filing) with the market regulatory authority in accordance with law. In cases where no registration or filing with the market regulatory authority is required, the Company shall update the relevant information and make a change filing within five working days after the change occurs:

1. the corporate information, including the company name, business scope, registered address, contact address, registered capital, paid-in capital, and the Company's regulatory contact persons and their contact details, and other relevant information;

2. the articles of association;

3. the names of each shareholder (in the case of a listed company, its controlling shareholder and other major shareholders), together with their subscribed capital, paid-in capital, and shareholding ratios;

4. the legal representative, directors, supervisors, and senior management personnel;

5. the establishment, alteration and nullification of SPV project companies and branches; and

6. the investment in, acquisition of equity in (or withdrawal from, or dissolution of) other corporate legal persons or economic organizations.

Article 17

Where a Finance Leasing Company is dissolved, a liquidation committee shall be established in accordance with law to conduct liquidation, arrangements shall be made for unmatured debts and the assumption of related liabilities, and the deregistration formalities shall be completed in accordance with law.

Where a Finance Leasing Company ceases to engage in finance leasing business, it shall no longer use any words or expressions related to "Finance Leasing" in its name or business scope.

Where a Finance Leasing Company is dissolved or ceases to engage in finance leasing-related business, it shall submit a written report on the circumstances to the regulatory department of the district where it is registered, together with proof of asset status, a creditor's rights and liability disposal plan and other relevant materials.

Chapter III  Business Operations and Risk Management

Article 18

A Finance Leasing Company may, in whole or in part, engage in the following business:

1. finance leasing business;

2. lease business;

3. purchase of leased assets, disposal and maintenance of residual value, consultation on lease transactions, and collection of lease deposits concerning finance leasing and lease business;

4. transfer and acceptance of assets under finance leasing or leased assets; and

5. fixed-income securities investment business.

Article 19

Finance Leasing Companies shall, based on their own resource endowments, provide priority support to industries and enterprises that align with the national and municipal industrial guidance, and play an active role in promoting the development of the equipment manufacturing industry, facilitating enterprise technological upgrading and transformation, supporting equipment import and export, and serving upstream and downstream enterprises in the supply chain. Where the Company engages in business involving individual customers, such business shall be carried out in a prudent and sound manner, on the premise that risks are kept under overall control and operations are sustainable, and in strict compliance with relevant laws, regulations and industry regulatory rules.

Finance Leasing Companies are encouraged to gradually increase the proportion of direct leasing business in their total operations, continuously enhance their asset management capabilities for leased assets, and pursue specialized and differentiated business operations.

Article 20

The leased assets suitable for financial leasing transactions shall generally be fixed assets with clear ownership, authentic existence, and the capacity to generate income, unless otherwise provided by the State or this Municipality.

Finance Leasing Companies shall lawfully acquire the ownership of the leased assets, and shall not accept as leased assets any property that has been mortgaged, whose ownership is in dispute, or that has been sealed up or seized by the judicial authority or has defects in ownership as leased assets.

Article 21

Finance Leasing Companies may obtain financing from banks and non-bank financial institutions under the supervision of the National Financial Regulatory Administration (NFRA), or raise funds through other channels such as shareholder loans, bond issuances, asset securitization, and the transfer of finance lease assets. All financing sources shall comply with the relevant laws and regulations of the State.

Article 22

Finance Leasing Companies shall not carry out any of the following business or activities:

1. illegally raising funds, and absorbing deposits directly or in disguised form;

2. granting loans directly or as entrusted;

3. lending funds to any other Finance Leasing Company directly or in disguised form;

4. financing, directly or indirectly, from the general public through peer-to-peer lending information intermediaries, various types of local trading venues, unlicensed asset management institutions, private investment funds, or other institutions by means of asset securitization, asset management plans, asset transfers (including transfers of claims or income rights), except where equity financing is conducted in accordance with law, or where otherwise provided by the State or this Municipality;

5. lending or leasing its finance leasing operation qualification;

6. collecting debts or disposing of leased assets by violent or other illegal means; or

7. other business prohibited by laws, regulations, or industry regulatory rules.

Article 23

Where a Finance Leasing Company's import of leased assets involves the administration of quota and licensing, the purchaser or property right owner of the leased assets shall complete the formalities in accordance with the relevant provisions, unless otherwise agreed.

Where a Finance Leasing Company whose business operation involves matters concerning foreign exchange administration, it shall comply with the relevant provisions of the State on foreign exchange administration.

Article 24

Finance Leasing Companies shall establish and improve their organizational structure with shareholders' meeting, board of directors (executive directors), (board of) supervisors and senior management as core governance bodies. Responsibilities should be clearly defined to ensure independent operations and effective checks and balances among these bodies, thereby forming a scientific and efficient decision-making, incentive and constraint mechanism.

Finance Leasing Companies shall develop and improve internal control systems and ensure the Company's safe and sound operation in accordance with the principles of comprehensiveness, prudence, effectiveness and independence.

Finance Leasing Companies shall, in light of their organizational structure, business scale, and complexity, establish a comprehensive risk management system to identify, control and mitigate risks.

Article 25

Finance Leasing Companies shall develop management systems for related party transactions. Such related party transactions shall be conducted in accordance with commercial principles, on an arm's length basis, with fair pricing, and under terms no more favorable than those for similar transactions with non-related parties.

Where a Finance Leasing Company votes or makes a decision for a transaction in which the lessee is a related enterprise, personnel who have an interest in the related party transaction shall recuse themselves. Major related party transactions of a Finance Leasing Company shall be approved by the shareholders' meeting, board of directors, or institutions authorized thereby.

Transactions between a Finance Leasing Company and its wholly-owned subsidiaries or project companies are not subject to the regulatory requirements for related-party transactions under these Measures.

Article 26

Finance Leasing Companies shall register the ownership of leased assets with the Unified Registration and Publicity System for Chattel Financing of the Credit Reference Center of the People's Bank of China, and shall promptly publicize the relevant ownership status. Where laws or regulations provide otherwise regarding the ownership registration of relevant leased assets, the relevant registration procedures shall be completed in accordance with law.

Article 27

Finance Leasing Companies shall establish and improve the leased property valuation and pricing system and determine the rent on the basis of the value, other costs and reasonable profits, among others, of the leased property.

In sale-and-leaseback transactions, the purchase price paid by a Finance Leasing Company for the leased asset shall be referenced against a reasonable pricing basis that does not contravene accounting standards, and the Company shall not purchase low-value assets at high prices.

Article 28

Rents, fees, liquidated damages, and other charges collected by Finance Leasing Companies from customers shall be disclosed in advance and explicitly agreed upon in terms of specific amounts or charging standards; where relevant laws, regulations, industry regulatory rules, or judicial interpretations prescribe explicit standards, such prescribed standards shall not be exceeded.

Article 29

Finance Leasing Companies shall emphasize the risk mitigation role of leased assets, closely monitor the extent to which the value of leased assets covers lease receivables, and formulate effective risk response measures.

Finance Leasing Companies shall strengthen the management of the unguaranteed residual value of leased assets, regularly assess whether there is impairment in the unguaranteed residual value, and make provisions for impairment according to the accounting standards in a timely manner.

Finance Leasing Companies shall strengthen the risk management of leased assets returned upon the expiration of the lease term or repossessed due to the lessee's default, establish sound disposal systems and procedures for leased assets, and reduce the holding period risk of leased assets.

Article 30

Finance Leasing Companies shall establish and improve accounting management systems in strict accordance with accounting standards and other relevant provisions, and shall account for and reflect the substance and risk profile of the transfer and acquisition of financial lease assets in a true and accurate manner.

Finance Leasing Companies shall manage financial leasing assets in such forms as sublease separately, and maintain separate accounts for them. A sublease shall be subject to consent of the lessor.

Article 31

Finance Leasing Companies shall establish an asset quality classification system and a provision system. Based on accurate classification, they shall make timely and adequate provisions for asset impairment losses to enhance their capacity to withstand risks.

Support shall be provided to qualified Finance Leasing Companies to lawfully access the Financial Credit Information Basic Database of the People's Bank of China, so as to continuously strengthen credit risk management.

Article 32

The proportion of a Finance Leasing Company's finance leasing assets and other leasing assets shall not be less than 60% of its total assets.

The total risk assets of a Finance Leasing Company shall not exceed eight times its net assets.

The fixed-income securities investment business conducted by a Finance Leasing Company shall not exceed 20% of its net assets.

Article 33

Finance Leasing Companies shall strengthen the management of key lessees, control the proportion of business with single lessees and lessees that are related parties, and effectively prevent and diversify operational risks. Finance Leasing Companies shall comply with the following regulatory indicators:

1. Concentration of financing to a single client. The total outstanding balance of all finance leasing business carried out by a Finance Leasing Company with a single lessee shall not exceed 30% of its net assets.

2. Concentration of financing to a single group client. The total outstanding balance of all finance leasing business carried out by a Finance Leasing Company with a single group shall generally not exceed 50% of its net assets.

3. Concentration of related-party transactions to a single client. The total outstanding balance of all finance leasing business carried out by a Finance Leasing Company with a single related party shall generally not exceed 30% of its net assets.

4. Aggregate related-party concentration. The total outstanding balance of all finance leasing business carried out by a Finance Leasing Company with all related parties shall generally not exceed 50% of its net assets.

5. Concentration of related-party transactions to a single shareholder. The total outstanding balance of financing to a single shareholder and all its related parties shall generally not exceed the shareholder's capital contribution to the Finance Leasing Company, and shall concurrently comply with the provisions of these Measures on the concentration of related-party transactions to a single client.

Article 34

Finance Leasing Companies shall establish and implement systems relating to cyber information security, improve their own business information systems, regularly review, upgrade and maintain their business information systems as well as their marketing and customer acquisition channels such as corporate websites, mobile applications, WeChat official accounts, and take effective technical measures in a timely manner to guard against viruses and cyberattacks, so as to ensure corporate information security. Finance Leasing Companies that provide relevant services to customers via the Internet shall conduct evaluations for classified protection of cybersecurity based on information security technologies in compliance with relevant provisions.

Article 35

Finance Leasing Companies shall truthfully and fully disclose to their individual customers the risks of relevant products or services, and shall not set any transaction conditions that violate the principle of fairness. They shall protect the lawful rights and interests of individual customers, such as property rights, the right to be informed, and the right to independent choice, in accordance with law.

Finance Leasing Companies shall establish customer information security protection systems, and shall not improperly use or disclose any customer-related information.

Finance Leasing Companies shall establish convenient and efficient dispute resolution mechanisms, improve their complaint handling procedures, and promptly resolve any disputes with customers.

Article 36

Finance Leasing Companies shall conduct marketing and promotional activities in accordance with law. They shall not publish any marketing or promotional content that is inconsistent with their business scope, and shall not make false, exaggerated, or one-sided statements about its products or services, or engage in any other illegal marketing or promotional activities.

Article 37

The directors, supervisors and senior management personnel of a Finance Leasing Company shall comply with the regulatory requirements of the State and this Municipality, perform their duties with due care and diligence, and effectively prevent and control risks.

Chapter IV  Supervision and Administration

Article 38

Finance Leasing Companies shall, as required, regularly submit business operation reports, annual (quarterly, monthly) operating information and statistical statements, annual financial and accounting reports audited by accounting firms, and other relevant information and materials through the supervision and administration information platform designated by the Municipal Financial Regulatory Bureau.

Article 39

Where a Finance Leasing Company experiences any of the following major risk events that are sufficient to jeopardize its continued operations, it shall submit a written report to the regulatory department of the district where it is registered within 24 hours, and concurrently file an online report through the supervision and administration information platform designated by the Municipal Financial Regulatory Bureau (If the situation is urgent, the Company may first make an oral report within 24 hours, and then submit the relevant written report and complete the online report within five working days. The same applies hereinafter):

1. A major liquidity difficulty that may result in the inability to pay or redeem more than 50% of the total liabilities due (or payable) within three months;

2. A major pending lawsuit or arbitration with an amount in dispute exceeding 30% of the Company's net assets;

3. The seizure, impoundment or freezing of major assets exceeding 30% of the Company's net assets, or the suspension of its major or entire business;

4. The disappearance of the main person in charge of the Company;

5. The Company or its senior management personnel are currently subject to criminal investigation by judicial authorities on suspicion of committing criminal offenses, or have been adjudicated guilty and imposed criminal penalties;

6. Mass incidents or major public security emergencies; or

7. Major negative public opinion incidents and other material risk events that may endanger the Company's ongoing operation.

Where a controlling shareholder (or actual controller) of a Finance Leasing Company experiences any of the major risk events as prescribed in the preceding Paragraph, the Finance Leasing Company shall report the matter to the regulatory department of the district where it is registered within 24 hours from the time it knows or ought to have known of such event.

The regulatory department of each district shall report to the Municipal Financial Regulatory Bureau within 24 hours after receiving the relevant major risk event report.

Article 40

Where a Finance Leasing Company experiences any of the following material events, it shall perform its information reporting obligation and make an online report through the supervision and administration information platform designated by the Municipal Financial Regulatory Bureau within five working days (if such circumstances occur relatively frequently, the Company may also submit consolidated batch reports on the relevant information of the preceding month within the first five working days of each month):

1. listing, directly or indirectly, on a domestic or overseas stock exchange, issuing bonds, issuing asset-backed securities, or incurring any other material debt in a single transaction with an amount exceeding 10% of the Company's net assets;

2. incurring a material loss or compensation liability with a single amount exceeding 10% of the Company's net assets;

3. providing guarantees to shareholders or other related parties (excluding guarantees for external financing of its holding subsidiaries and project companies), or incurring any other contingent liability such as an external guarantee with a single amount exceeding 20% of the Company's net assets;

4. entering into a material related party transaction where the amount of a single transaction accounts for 5% or more of the Company's net assets, or where, after the occurrence of such transaction, the outstanding balance of transactions between the Company and the related party accounts for 10% or more of the Company's net assets (excluding the circumstances set forth in Item 3 of this Article);

5. shares representing five percent or more of the Company held by any shareholder being pledged, frozen, judicially auctioned, placed under trusteeship, established as a trust, or having their voting rights restricted in accordance with law;

6. inability of any director, one-third or more of the supervisors, or the general manager to perform their duties;

7. enterprise or its legal representative being subject to major administrative penalties, such as relatively large fines (a fine of 500,000 yuan or more imposed on the enterprise, or a fine of 50,000 yuan or more imposed on a natural person), confiscation of illegal gains, confiscation of illegal property, temporary suspension or revocation of licenses (or business licenses), order to suspend production or business, order to close down, restriction on engaging in related professions, administrative detention, and any other similar penalty; or

8. other matters that do not yet constitute material risk events listed in this Article but have a material impact on the Company's operation and development.

Article 41

The Municipal Financial Regulatory Bureau and each district regulatory department shall formulate supervision and inspection plans for Finance Leasing Companies on an annual basis, and shall conduct continuous supervision and inspection of their business activities. Such supervision and inspection may be carried out by means of off-site supervision, on-site inspection, or other methods.

Article 42

The Municipal Financial Regulatory Bureau and each district regulatory department shall comprehensively and continuously collect information on the operation, management and risks of Finance Leasing Companies, and shall maintain a clear and continuous understanding of the basic conditions of such enterprises.

Each district regulatory department shall pay particular attention to the financial conditions, business operations and operational risks of Finance Leasing Companies registered within its administrative area, assess the effectiveness of corporate governance, internal control and risk management measures, and monitor risk spillovers and cross-contagion.

Article 43

The Municipal Financial Regulatory Bureau and each district regulatory department shall, in light of the issues identified through off-site supervision and the regulatory requirements for risk management, intensify on-site inspections of Finance Leasing Companies, increase the depth and breadth of such inspections and improve their quality and efficiency.

On-site inspections may include the following measures: interviewing staff members of Finance Leasing Companies; retrieving, reviewing, and copying documents, materials, and system data related to the inspection matters; and registering and preserving in advance any documents or materials that may be transferred, destroyed, concealed, or tampered with.

Article 44

The Municipal Financial Regulatory Bureau shall, based on a comprehensive review of off-site supervision and on-site inspection findings, organize a unified regulatory rating of Finance Leasing Companies and implement classified supervision and administration.

The Municipal Financial Regulatory Bureau and each district regulatory department shall, based on the regulatory rating results, determine the frequency and scope of supervision and inspection, as well as the regulatory measures to be adopted.

Article 45

Where the Municipal Financial Regulatory Bureau and each district regulatory department, in the course of performing their duties in accordance with law, find that a Finance Leasing Company is suspected of violating relevant national or municipal regulatory requirements, or that there exist other risks or issues such as being out of contact, being a shell company, or non-cooperative with supervision, they may adopt measures such as conducting regulatory talks, ordering it to make a public explanation or to file regular reports, issue a risk warning letter, make a public announcement or notice, circulate a notice of criticism, or order rectification.

In the circumstances set forth in the preceding Paragraph, the Municipal Financial Regulatory Bureau and each district regulatory department may require the controlling shareholders (or actual controllers), the legal representative, directors, supervisors, senior management personnel or other relevant persons of the Finance Leasing Company, to provide explanations regarding matters such as the Company's business activities and risk profile.

Where a Finance Leasing Company has major hidden risks, the Municipal Financial Regulatory Bureau may, in accordance with law, adopt measures to prevent risks from expanding, including ordering the Company to suspend relevant business operations and ordering it to cease establishing additional branches. Where the major risks cannot be eliminated or the Company is unable to restore normal operational capacity, the Municipal Financial Regulatory Bureau shall revoke its business license or pilot designation, and urge the Company to amend its Company name and business scope, or facilitate its voluntary dissolution and deregistration in accordance with law.

Article 46

The Municipal Financial Regulatory Bureau shall guide and supervise each district in advancing the regulatory work for Finance Leasing Companies. Each district regulatory department shall submit an annual report on the regulatory and development status of the Finance Leasing Companies within their respective administrative areas to the Municipal Financial Regulatory Bureau.

The Municipal Financial Regulatory Bureau shall establish a performance evaluation system to inspect and evaluate the fulfillment of regulatory duties by each district regulatory departments. The performance evaluation shall mainly cover the establishment of regulatory mechanisms, the implementation of routine regulatory work, risk monitoring, early warning, prevention, and disposal, the handling of and responses to petitions, complaints, and reports, the submission of various materials and information, and the management of regulatory archives.

Based on the performance evaluation results, the Municipal Financial Regulatory Bureau may designate districts with inadequate regulatory work as high regulatory risk areas and adopt more stringent regulatory measures; for districts with standardized and orderly regulatory work, the Bureau shall provide priority support in handling relevant regulatory matters.

Article 47

Self-regulatory organizations in the finance leasing industry are encouraged to actively play their roles and perform the following functions in accordance with their articles of association:

1. formulating industry self-regulatory rules, supervising and inspecting the conduct of their members and their practitioners, and implementing self-regulatory management;

2. protecting the lawful rights and interests of their members, conveying industry suggestions and appeals, and assisting local financial regulatory departments in carrying out industry regulation;

3. urging their members to provide financial consumer education, conducting dispute mediation, and protecting the lawful rights and interests of financial consumers;

4. investigating and handling complaints concerning members' violations of laws or regulations;

5. organizing member training and exchanges; and

6. other functions prescribed by laws and regulations.

Article 48

Third-party institutions, such as law firms, accounting firms, and credit rating agencies, are encouraged to leverage their professional expertise and participate in the supervision and inspection of Finance Leasing Companies through means such as internal control assessments, compliance evaluations, verification and audits, and credit ratings, so as to promote the sound and healthy development of the finance leasing industry in this Municipality.

Chapter V  Legal Liability

Article 49

Where a Finance Leasing Company commits any of the following acts during its business operations, the Municipal Financial Regulatory Bureau shall, based on the seriousness of the circumstances and pursuant to the Regulations of Shanghai Municipality on Regional Financial Supervision and Administration and other relevant laws and regulations, impose penalty measures such as ordering the suspension of business, confiscation of illegal gains, imposition of fines, and revoking of pilot qualifications:

1. failing to file relevant matters for record as required, or failing to report major risk events or other major matters, or submit business information or other materials as required, or failing to take immediate measures upon the occurrence of a risk event;

2. obstructing the performance of duties by the Municipal Financial Regulatory Bureau and the district regulatory departments, refusing or resisting supervision and inspection, or concealing, destroying, or transferring relevant materials; or

3. engaging in any other business operations that violate laws, regulations, or industry regulatory rules.

Article 50

Where the Municipal Financial Regulatory Bureau imposes an administrative penalty on a Finance Leasing Company in accordance with law, it may impose necessary administrative penalties on the directors, supervisors or senior management personnel who are directly liable pursuant to the Regulations of Shanghai Municipality on Regional Financial Supervision and Administration.

Article 51

Where a Finance Leasing Company is found to have any irregular business operations or serious illegal and dishonest conducts as prescribed by relevant laws, regulations or industry regulatory rules, the Municipal Financial Regulatory Bureau and district regulatory departments may make public announcements regarding the relevant circumstances and, when necessary, refer the matter to the relevant authorities for handling in accordance with law. If suspected of a crime, the case shall be referred to the judicial authorities for handling in accordance with law.

Article 52

Third-party institutions and their practitioners that issue documents such as legal opinions and verification and audit reports during the establishment, alteration, and routine supervision of Financial Leasing Companies shall issue the corresponding documents in accordance with the working procedures prescribed by the practice rules of the relevant industries, and shall examine and verify the authenticity, accuracy and completeness of the contents of the documents they issue. Where the Municipal Financial Regulatory Bureau and district regulatory departments discover any false records, misleading statements, or major omissions in the relevant documents, they may make public announcements regarding the relevant circumstances and notify the district regulatory departments or self-regulatory organizations.

Article 53

Where any personnel of the Municipal Financial Regulatory Bureau or district regulatory departments abuse their powers, neglect their duties, or engage in favoritism or irregular practices in the supervision and administration of Finance Leasing Companies, they shall be subject to disciplinary sanctions in accordance with  law. If suspected of a crime, they shall be transferred to judicial authorities for handling in accordance with law.

Chapter VI  Supplementary Provisions

Article 54

Except for the matters expressly specified in these Measures, the Pudong New Area, the China (Shanghai) Pilot Free Trade Zone, and other relevant regions may, in accordance with the regulatory work arrangements of the Municipal Financial Regulatory Bureau, assume responsibility for other relevant regulatory work regarding Finance Leasing Companies within their respective regions.

Article 55

A "controlling shareholder" as referred to in these Measures means a shareholder or other investor that holds 50% or more of the equity or voting rights in a Finance Leasing Company, or that holds less than 50% of the equity or voting rights but whose equity or voting rights are sufficient to have a significant influence on the decision-making of the Finance Leasing Company.

A "major shareholder" as referred to in these Measures means a shareholder or other investor that holds 5% or more of the equity interest or voting rights in a Finance Leasing Company, but does not constitute a controlling shareholder.

An "actual Controller" as referred to in these Measures means a person who, although not a direct investor of a Finance Leasing Company, is able to actually control the Finance Leasing Company through investment relationships, agreements, or other arrangements.

A "related party" as referred to in these Measures may be identified in accordance with the provisions of the Accounting Standards for Business Enterprises No. 36 — Disclosures of Related Parties.

"Senior management personnel" as referred to in these Measures means the general manager, deputy general manager, and the heads of risk control, compliance audit, and financial management departments of a Finance Leasing Company, or any person who actually performs the relevant duties.

"Risk assets" as referred to in these Measures shall be determined based on the total amount of remaining assets after deducting cash, bank deposits, and investments in government bonds from the total assets of the enterprise.

"Out of contact" as referred to in these Measures means that a Finance Leasing Company falls under any of the following circumstances: it cannot be contacted; it cannot be found through an on-site inspection of its registered address; although the staff of the enterprise can be contacted, they are unaware of and cannot contact the actual controller of the enterprise; it fails to submit monthly business operation information as required by regulatory authorities for more than three consecutive months.

A "shell company" as referred to in these Measures means a Finance Leasing Company that falls under any of the following circumstances: it fails to submit and publicize the annual report for the previous year through the National Enterprise Credit Information Publicity System in accordance with law; it has been established for more than six months but has no paid-in registered capital; regulatory information indicates no business operations in the recent six months; it has no tax payment records or makes zero tax declarations in the recent six months.

Article 56

The Municipal Financial Regulatory Bureau may, in accordance with national and municipal economic and social development plans as well as changes in market conditions, and in light of the regulatory rating of the entities concerned, appropriately adjust the regulatory requirements on business concentration and relatedness for Finance Leasing Companies engaged in sectors in line with national and municipal policy orientations, including aviation and shipping, marine engineering equipment, integrated circuits, medical devices, artificial intelligence, high-end manufacturing, energy conservation and environmental protection, infrastructure, urban renewal, and livelihood protection.

Article 57

Finance Leasing Companies established prior to October 1, 2021 shall, in principle, meet all the regulatory requirements set forth in these Measures by June 30, 2023. Enterprises engaged in finance leasing business with longer lease terms, such as aircraft or vessels, may apply to the Municipal Financial Regulatory Bureau through the regulatory department of the district where it is registered for an appropriate extension of the transition period.

Article 58

These Measures shall be interpreted by the Municipal Financial Regulatory Bureau.

Article 59

These Measures shall be effective as of October 1, 2025.