China Has Implemented The Basic Legal Issues Of Asset Securitization

Asset securitization is a financial innovation that transforms illiquid assets into tradable securities. 'Risk-remoteness' and 'credit enhancement' are two legal principles in ensuring the success of an asset securitization project. Based on such two principles, asset securitization involves three major legal issues: Special Purpose Vehicle (SPV), true sale and credit enhancement means. SPV is a new legal entity created purely for the purpose of bankruptcy-remote. True sale is the legal means of segregating the assets from the originator's credit condition. Credit enhancement tools are employed to accomplish a high credit rating. Under the comprehensive guidance of theories of economics and law science, the dissertation, adopting the research methods of structural analysis, comparative analysis and positive analysis, introduces the legal structure of asset securitization and probes into the three basic legal issues. The present state of China's laws concerning conducting asset securitization is also analyzed and some suggestions are made on perfecting the legal framework of China.