Can China Develop a Viable Cross-Border Securitization Market?

Abstract

The past year has seen a dramatic pick-up on domestic securitizations in the People’s Republic of China (PRC). This article provides an overview of the two main government-sponsored securitization schemes in the PRC—one administered by the China Bank Regulatory Commission (CBRC), the other administered by the China Securities Regulatory Commission (CSRC). The article mainly focuses on the legal, regulatory, constitutional, and other issues that must be addressed before a viable public cross-border securitization market out of China can be developed. As with many financial initiatives in China, the CBRC and CSRC schemes are fairly new, and as such untested or inadequately tested in PRC courts. Moreover, the CBRC and CSRC regulations are administrative regulations and not statutory law. Concepts such as legal isolation, commingling, and bankruptcy remoteness as they apply to securitizations are new to this market and untested in its courts. From a legal point of view, the single best thing that could happen for a securitization market to develop in China, for both domestic and cross-border transactions, is for the National People’s Congress (NPC) to enact a securitization statute as other civil law jurisdictions in Asia, such as Korea, have done.