China's central bank to promote securitisation of credit assets

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BEIJING, July 16 (CEIS): Vice President Liu Shiyu of People's Bank of China (PBC), China's central bank, points out recently that China will go on promoting the work of asset-backed securities (ABS) on a trial basis, developing tools to transform indirect financing into direct financing, and strengthening R&D of derivative credit products.
Addressing a credit product innovation meeting of PBC, Liu suggested China seriously study the development rules of monetary market, bond market and stock market to grasp their features, functions and operation, define the focus of financial products innovation and strengthen and standardise management of inter- bank market.
The meeting has clearly urged innovation of basic credit products, coordinated development of the credit primary and secondary markets, active development of credit derivative products, and cooperation among competent departments and market members concerned.
China piloted ABS on a trial basis in March 2005. As the first batch of the banks to pilot the experiment, the State Development Bank and China Construction Bank issued only three ABS products, with combined scale exceeding 13 billion yuan.
In June this year, PBC approved issue of "Kaiyuan ABS" on China's inter-bank market, kicking off the second round of ABS experiment. However, the product failed in issue, mainly due to bad fluidity of the product, and low profit rate.