Pilot Securitization in China

Lin Zhong Polly Zhang

Overview

The so-called securitization in China shows two trends, i.e. corporate assets securitization as per the Trial Measure for Client Assets Management Business of Securities Companies (TCAS) published by China Securities Regulatory Commission (CSRC) in 2003 and credit assets securitization as per the Administration Measure on Pilot Project of Credit Assets Securitization (APPA) issued by The People’s Bank of China (PBC) and The China Banking Regulatory Commission (CBRC) in 2005. In fact, corporate assets securitization in China is not handled in a general way of securitization since under TCAS purchase of corporate assets is paid by funds raised by a client asset management project pre-established by a securities company as per TCAS instead of funds collected from public offering of asset-backed securities. Therefore no asset-backed security will be issued and the so-called corporate assets securitization is actually a financing arrangement product operating in a semi-securitization way. Contrarily, securitization of credit assets takes an orthodox approach. That is, following the model advanced by the APPA, a financial institution, normally a bank, as the originator offers a portfolio of credit assets with stable future cashflows expected to trustee companies who will accordingly sell asset-backed securities (ABS) to investment institutions and pay for yields on ABS by cashflows generating from the entrusted credit assets. Both asset-backed securities and mortgage-backed securities issued upon credit assets transferred by financial institutions shall be regulated by the APPA.