23 September 2015

The Role of Securitisation in China’s Capital Market

China’s Asset-Backed Securities Market: the case for uniform enforcement of a risk measurement system.

For China, the “real” securitisation of its markets began in April 2005, when the People’s Bank of China (PBOC) and China Banking Regulatory Commission (CBRC) together cleared away a space for it: a pilot market with facilitating regulations. Since then, China has moved full throttle to integrate securitisation market architecture in its capital markets.

Success with new markets, however, is dependent on attracting the right commercial partners to create deal flow, and a compelling dimension of China’s securitisation story comes down to which commercial institutions take the lead and use it. Securitisation also has a dark side. Its invisible levers can change the velocity of money and debt accumulation in the economy. Will securitisation be China’s magic bullet to: diffuse risk concentrations, increase liquidity, tier the capital market and channel funding into the real economy? Or will it encourage a build-up of hidden risk unstoppable by market discipline or tough supervision? How will China’s securitisation market enter the global capital markets? How will its commercial interests shape securitisation – and who will they be?

The paper “Who will take the lead in shaping China’s securitisation market model?” sets out to answer these questions.

by Ann Rutledge

  • Hong Kong University of Science and Technology