China expands asset securitization to boost real economy

There is increasingly wide recognition that securitization can revitalize existing assets to address corporates' funding needs, offer investors more investment choices and contribute to the government's goal of developing a multi-tiered capital market.

China's securitization boomed last year with issuance amounting to more than 300 billion yuan, more than double the combined total of the previous years.

Experts have said that China's securitization market is still in its infancy with ample growth potential.

At 300 billion yuan, the market accounted for a tiny 0.5 percent of China's GDP last year, a far cry from 60 percent in the United States and 22 percent in Britain, and trailing behind Japan's 3.6 percent, statistics from the China International Capital Corporation show.

"With the experience accumulated from the pilot program, the government's move for expansion will let securitization play a bigger role in activating assets and improve resource redistribution," said Ji Zhihong, head of the financial market arm of the People's Bank of China.

Ji called for effort to make investors more comfortable with the securitization market, citing the relatively complicated nature of asset-backed securities (ABS).

"Timely information disclosure and an improved rating mechanism should be in place so that investors can better assess the risks in ABS products," he said.