China Securitization Market Sees 100 Flowers Bloom

As reported in the Financial Times, China’s securitization market has blossomed this year after a stilted start more than a decade ago as authorities embrace financial innovation, with bankers packaging an eclectic mix of assets from dance ticket revenues to bridge tolls. “Almost every conceivable asset from anyone can be securitized. This makes the market far more diverse than in the US and Europe,” says Pang Yang, chief executive of China Securitization Analytics, a website that provides data and analysis of the ABS market.

According to the FT data, deals totaled RMB 584bn (USD $86bn) through the end of September, close to 2015’s full-year total of RMB 615bn (USD $90bn). Banks and non-financial companies together completed 384 securitization deals in the first nine months of 2016, up from 327 deals for all of 2015, according to Wind Information. Non-bank deals have accounted for 284 of this year’s total. 

As the nation's securitization market takes off, foreign participation is also increasing. The auto-finance units of General Motors, Ford, Mercedes-Benz and Volkswagen have all issued asset-backed notes in the interbank market this year. However, the lack of diversity in the investor base is an impediment to greater liquidity in China’s securitization market. Major commercial banks are by far still the dominant players.

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