Striking accord between PPP and securitization

With the continuing development of public-private partnerships (PPPs) in China, financing has become the key to the realization of PPP projects. The combination of asset securitization, as a financial means for financing projects, and the PPP has gradually won the encouragement and support of the state at the policy level.

In December 2016, the National Development and Reform Commission (NDRC) and the China Securities Regulatory Commission (CSRC) jointly issued the Notice on Tasks Relating to the Promotion of Asset Securitization for PPP Projects in the Traditional Infrastructure Sector (document No. 2698). The Shanghai Stock Exchange, Shenzhen Stock Exchange and the Asset Management Association of China also simultaneously opened green channels for PPP asset securitization, each expressly specifying the principle of “rapid review upon filing, and enhancement of efficiency” for the PPP asset securitization filing stage.

The characteristics of PPP projects of stable investment returns and long payback period are consistent with the requirements of asset securitization in respect of the underlying assets.

The criteria for underlying assets required by the CSRC’s Administrative Provisions for the Asset Securitization Business of Securities Companies and the Subsidiaries of Fund Management Companies are as follows: compliance with laws; clear title; ability to generate an independent and predictable cash flow and specifiable property rights or property; and the specific form thereof being enterprise receivables or, alternatively, such property rights as lease claims, credit assets, beneficial interests in trusts, etc., or immovable property or beneficial interests in immovable property, such as infrastructure, commercial property, etc. The requirements in respect of underlying assets of the Guidelines for Asset-Backed Notes of Non-Financial Enterprises (Revised Draft) issued by the National Association of Financial Market Institutional Investors are essentially identical to the above-mentioned criteria.