A batch of pawnshops is likely to get licensed for business later this month, an insider has told China Daily.

"Around 500 pawnshops nationwide have filed their applications to the Ministry of Commerce, including 15 from Beijing and 20 from Shanghai," said Guo Jinshan, vice-chairman of the National Pawn Commission. He is also the president of Beijing Pawn Association.

An official from the Department of Market Systems Development with the Ministry of Commerce confirmed that these applications are being examined, but she refused to give more detailed information.

There are 1,375 official pawnshops in China, in almost all the provinces, autonomous regions and municipalities. This figure could jump by 36 per cent if all applications are approved.

"After a two-year halt on approving new pawnshops, this batch was fuelled by a strong market demand," said Guo Jinshan.

The pawn industry has expanded a great deal in the past few years. In Beijing there were only four pawnshops between 1997 and 2001. Now 32 have business licences, and have a registered capital of 500 million yuan (US$60.2 million).

Last year, the value of items pawned in Beijing was about 2 billion yuan (US$241 million), and around 70 per cent of the city's pawnshops were profitable, making profit of 15 to 20 per cent of their registered capital.

"We had a registered capital as little as 5 million yuan (US$602,000) in 1997," recalled Fang Tienong, marketing manager of Baoruitong Pawnshop, a leading one in China. "But now it has soared to 90 million yuan (US$10.8 million) because of the fast developing market and increasing value of items pawned."

Meanwhile, regulations on pawnshops management have been revised recently, boosting the development of the industry by raising the threshold and lowering charges.

The regulations, released by the Ministry of Commerce and the Ministry of Public Security, took effect from April 1. "It will reduce the financial risks and encourage people to finance by pawning," said Guo Jinshan.

Guo said real estate pawn was the driving force behind the burgeoning market. It accounts for more than 50 per cent of all national business, and the ratio in Beijing is expected to top 70 per cent.

In fact, Beijing has just seen big deals in real estate pawn as the authorities have released a raft of measures to strengthen macro-control of the real estate sector.

As of June 1, the government started to collect business tax on the full earnings of home sales when owners sold their homes within two years of buying them.

"Most of our business in the past two months involved real estate pawn," said Fang, "Eager to sell houses before June 1, quite a number of investors resorted to pawning their property to pay off their remaining home loans."

Zhang Yi, who just got 250,000 yuan (US$30,100) from a pawnshop, said he paid a monthly charge of 3.2 per cent of the property pawn value, that is, 8,000 yuan (US$963), thinking it was still a good way to ease his money shortages.

"If I went to the bank and applied for a mortgage, I would have missed the June 1 deadline and have to pay more money," Zhang said.

Compared with bank loans, real estate pawn is not confined to credit lines and runs more conveniently, especially for those who need money urgently. It takes an average of 10 minutes to finish a deal.

At present, pawnshops have three major categories of customers: individuals, self-employed businessmen and small and medium-sized enterprises.

As well as the major function of short-term financing, some customers take pawnshops as a good place to find bargains and store expensive goods.

"I visit pawnshops regularly," said Zhang Yan, a fashionable office lady. "Some quality products only sell for 20 per cent of their market price, and you need not worry about whether it's a fake one or not since the staff will examine the quality."

She has just spent 1,200 yuan (US$145) on a diamond ring which would sell for more than 4,000 yuan (US$482) in a department store.

Zhong Daming uses pawnshops as a safe deposit box, putting his 120,000 yuan (US$1,446) watch into the Huaxia Pawnshop before embarking on a two-month business tour.

"It costs me only 20 yuan (US$2.4) a month in the pawnshop," he said. "While the banks' safe deposit boxes are inaccessible for less than six months with a minimum charge of 400 yuan (US$48.2)."

Despite the rapid development of the pawn industry in recent years, Guo Jinshan believes investments in pawnshops should be cautious.

"A sound knowledge of the pawn industry and a proper market position both matter," said Guo. "Brand commodity pawn is more appropriate for investors with limited capital as it is not so risky, while investors with sufficient capital and expertise may think about car and real estate pawn."

(China Daily June 16, 2005)