The mainland's asset-backed securitisation market has the potential to grow to hundreds of billions of yuan in the next few years, with investors and issuers keen to capitalise on the fresh financial product. The market's development is part of the central government's push to develop the fixed-income market, which will help the country diversify investment and financing channels for savers and borrowers. At present, about 95 per cent of borrowings are financed by bank loans. Asset-backed securities also will help corporate issuers lower financing costs, while banks and asset management firms can use the investment tool to unload long-term assets such as loans and mortgages, both performing and non-performing. 'From the investors' point of view, the market's variety of fixed-income investment products is lacking,' said Alex Zhao Xiaozheng, managing director of investment banking at China International Capital Corp (CICC). 'From the corporate issuers' standpoint, they can reap significant financing cost savings.' China's asset-backed securities market saw its first product launch in September last year, when mobile phone network operator China United Telecommunications launched a 9.5 billion yuan security backed by its network-leasing revenues. CICC was book runner for the deal. It was also a joint book runner for the mainland's third-largest lender, China Construction Bank's 3 billion yuan mortgage-backed security issuance. In December, policy lender China Development Bank sold 4.18 billion yuan of securities backed by loans. China Cinda Asset Management is reported to be considering securitisation of 20 billion yuan of non-performing loans (NPLs) acquired from the Bank of China's Guangdong operation. Proceeds from sale of the NPLs-backed securities, potentially commercial paper on the interbank market, would help improve its balance sheet, paving the way to achieve its goal to become listed. 'Many people have predicted that the asset-backed securities market could reach 100 billion to 200 billion yuan in a year,' Mr Zhao said. 'I think this could be easily done judging from demand ...if there is any limit on its growth it would be the speed of obtaining approvals.' He expected growth in asset-backed securities issuance by corporates to be faster than banks' issuance of mortgage-backed securities as mainland banks' mortgage portfolios amount to only 8 per cent of their total lendings, lower than a 20 per cent reasonable benchmark. But he cautioned that companies would need to select the right assets for securitisation to ensure market acceptance and control risk. 'You need to have stable, foreseeable cash flows backed by contractual and legal rights, so infrastructure-related revenues like toll roads and power receipts are suitable,' he said. Mr Zhao also warned issuers of the risk of mis-investment. 'Raising the money can be easy, but the companies must be careful in using it and beware of the investment risk,' he said.