Is China Securitisation Market Ready for Liftoff?

Last week’s public commentary by the People’s Bank of China, the PRC Central Bank, regarding the nascent domestic structured finance marketplace, was a clear attempt to illuminate the importance of the financing technique to the continued development of the domestic economy.  First authorized by the Central Bank as an alternative method for raising capital among financial institutions several years ago, the more recent drop off in China’s economy and tightening credit are no doubt driving some of this strategy to re-push the securitisation button.

In the first few years of the Government authorized “pilot program” some Y70 Billion (US$11Billion) was issued (between 2005 through 2008).  The Government then went on to suspend the program following the US credit meltdown, only to reopen the market in 2011.  What we may now be seeing is a confluence of regulatory “comfort” about the merits of the financing tool and a growing need, as these structures become more economically efficient when compared to other sources of capital.

Observers may want to take note that some local market experts suggest that the China market could be as large as US$500Billion.  Compare that to the Euro market, generally viewed as the second largest securitisation market after the US, which is “only” a US$300Billion market.

About markferraris
Managing Principal Orchard Street Partners LLC

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