A Study On The Industrial Effect Of Korean Financial Lease System And Policy

There is an enormous significance in one industry that financial leasing market have been developed for more than 40 years in Korea. From 1970 ’s to 1980 ’s is Korea’s economic development period and in the heavy industry sector there needed huge funds and foreign capital investment in equipment. But there were insufficient domestic capital at that time. In these situations, the emergence of the financial leasing is inevitable, because the purpose of financial lease is providing equipment investment funds. Although various government restrictions on leasing forms, applications and product development, but financial lease contributed greatly to Korea’s economic development. In the past of simple statistics show that Korea financial leasing market seems to be in a good state of development. But surrounding financial leasing market, due to various causes of domestic government policy, as well as the institutional changing in the international financial environment, Korea leasing market has been faced with a difficult situation.The government’s special policy on financial leasing market did have positive effect on Korea financial leasing short-term development. For example, policy-oriented supplier of low interest financial leasing capital helped the activation of finance lease transactions. And through the first enactment of the《Equipment leasing Business Act(1973): Credit Specialized Financial Business Act(1997~now)》, could promote Korea small and medium enterprises’ development and domestic production of machinery and equipment. Also, Korea Government implemented expansionary and reduction policy on foreign capital introduction to control the Imports of foreign-made leasing equipment. In addition, through the various policy funding and allocation ratios of finance lease investment in small and medium enterprises’, Korea government had planned to lead Korea economic development, so Korea finance leasing market could grow up together.But Korea is different from the countries which leasing market has already developed, Korea finance leasing market strictly controlled by the government. Korea government maintained the mandatory policy for financial leasing market, this impeded market role in promoting the development of financial lease. For example, single business forms of and too many restrictions of financing leasing market accumulated many problems. Moreover, regulation of financing structural increased the leasing company’s operating difficulties. In addition, as Korea government’s policy of opening up and liberalization of interest rate policy, blind support of extended policy both at home and abroad had led to issues such as exchange rate risk of the leased asset. Even in the area of legal, tax, accounting, regulatory, insurance etc., the entire system of financial leasing industry has not been completed yet. Therefore, after the outbreak of the world financial crisis, Korea financial leasing market also had faced a painful ordeal and been forced reorganization of the industry. Even more serious thing is that after the financial crisis financial leasing market in Korea is still stagnant.Development of financial leasing market in China is currently on growing point, so we can reflect on various government policies and institutional significance. Introduced to China in early 1980, Chinese financial leasing market’s growth stagnated due to the poor business environment as well as poor social overhead capital facilities(Infrastructure) and relatively high rates of interest comparing to the Bank and other factors. But recently, environment of financial leasing market has certainly changed, such as revision of laws, improvement of social overhead capital, manufacturer’s competitive participation in financial leasing market etc. Financial leasing market keeps growing in China, but because of the bank’s secured loan-driven institutions, small and medium enterprises are facing a persistent shortage of funds. In order to solve these problems, the Chinese government, through strengthening leasing industry support(permit foreigners to invest independently etc.), continues financial leasing industry development policies.By reviewing Korea government’s policies and systems on leasing area, we could consider a pushing and blocking effects of Korea’s unique policies and institutions on financial leasing market from all sides. And it can also provide good lessons for Chinese financial leasing market’s progress of environment and strategies in the future.