【China Opens Up To New Deal Structures, New Participants】China’s securitization market finally reached a new maturity level this fall, with new participants and new deal structures. The watershed moment was September’s listing of asset-backed securities from China Unicom on the Shanghai Stock Exchange. Additionally, two bankbased pilot projects are expected.
The two banks, China Construction Bank and China Development Bank, received government approval to begin securitization this past March.
“The topic of asset securitization has become increasingly hot since the beginning of this year,” said Jeff Wei, founder of Shanghai-based research firm CnWallstreet.com.
The approval came just one month after the China Banking Regulatory Commission issued new regulations regarding asset backed securities, allowing inter-bank bond market trading and defining the role of a special purpose trust company as a part of the securitization process, Wei said. “Before the two bank projects, there hadn’t been any true securitization products in China,” Wei said. “Though the securitization history can date back to the 1990s, when there were several immature trials.”
According to Wei, Chinese securitization regulations require that the assets backing the securities bring in a steady income, that a special purpose vehicle be used as an intermediary between the originator and the investors, that the loan assets be transferred through a true sale, and that the products be publicly traded.
“The last two features are extremely important indicators of a true securitization product,” Wei said. With the Unicom securitization project traded on the Shanghai Stock Exchange, and the two planned bank projects expected to be traded in the interbank bond market, the problem of liquidity is taken care of, Wei added.
(Abbriviated from the report published by SOURCEMEDIA, for the full story of this article, please go to Industry News - Asset Securitization Report)