Securitization in China: Déjà Vu?

Abstract

In China, securitization has been promoted as a means of reducing reliance on the shadow banking system and ensuring that enough credit keeps flowing to a slowing economy. A cure for China?s banking woes may, in fact, be the instrument that nearly brought down the global financial system—securitized products. The author examines the history and structure of the Chinese securitization market. Whereas the U.S. securitization market developed as a means to accelerate liquidity, the Chinese securitization market was initially established to deal with non-performing loans. The article discusses the pre- and post-2008 Chinese securitization market and provides an overview of newer securitized products being introduced to China in an effort to boost confidence in the banking sector.

TOPICS: Fixed income and structured finance, emerging