A Study On The Legal Problems Of Asset Securitization In Chinese Enterprises

Asset securitization was themost important and fastest-growing financial innovation in the international capital market throughout the second half of the 20 thcentury. As a new financial instrument, it became the most important financing mode soon after its debut.After years of theoretical and practical work, China has made considerable progress in the securitization marketsince the pilot program of the asset securitization was officially startedin March 2005, which can be demonstrated mainly by theexpanded issuance scaleand the enriched variety of the securitized products.Enterprise asset securitization is based on the credit asset securitization theoryand is born only when technology is developed to a certain stage.For China, asset securitization can revitalize the stock assets of the enterprise, disperseits operational risks and solve its financing problems.However, like other financial innovations entering the market, asset securitization can also be risky. A significant contribution to the US subprime mortgage crisis is that, in the process of assetsecuritization, many financial institutions operated illegally, loaning high-risk mortgageinto securitized assetsdeliberately andstealthily. In the mean time, they tried to sell these risky mortgage-backed securities to the investors. Normally, the assets to be securitized are physical assets or intangible assets,which is rather different from the credit assets in legal characteristics.As the China Securities Regulatory Commission issued a "Securities Companies and Subsidiary of Fund Management Asset Securitization Regulations" and its supporting implementation details in November 2014, the enterprise asset securitization business which takes the specific asset management plan as its special purpose vehicle, has been up for great opportunities for further development.However, even though the Securities Regulatory Commission has published normative documents since the beginning of the pilotprogram, the relatively weak legal framework of the enterprise asset securitization has not been enhanced fundamentallycompared with that of the credit asset securitization. In addition, as the provisions in the draft "Securities Act" groupedthe asset-backed securitiesinto securities varieties, as asecurities form of enterprise asset securitization, its regulatory systemalso needs to be adjusted and innovated, due to the impact of the reform of the registration system.This article will have a comprehensive analysis on the legal matters of enterprise asset securitization, by comparing it with the credit asset securitization. My analysis is also based on the factors we need to study on enterprise asset securitization, such as the underlying assets, special purpose vehicle, information disclosure and China’s actual situation. Combining my study with the knowledge of economics and law, and drawing on the legislative experience of the US asset securitizationmarket, I am looking forward to making suggestions on building the legal and regulatory system for China’s enterprise asset securitization.