The China Securities Regulatory Commission (CSRC) has launched a round of investigations into potential irregularities involving the country’s financial assets exchanges (金融资产类交易场所).
On 17 December CSRC announced that it had recently launched on-site inspections of financial assets exchanges, focusing in particular on “irregular financial operations” and “comprehensively clarifying the underlying number and risk conditions of operations.”
China’s financial asset exchanges are trading platforms that grant access to finance in exchange for ownership of provisional transfer of various assets, oftentimes involving state-owned assets, debt assets, privately raised equity and gold.
The exchanges usually focus on regional interbank markets, and are launched by local state-owned asset exchanges, companies or online finance platforms. The Beijing Financial Asset Exchange and the Tianjin Financial Asset Exchange were first two platforms of this type in China, and were both established in May 2010.
In recent years financial asset exchanges have proved an increasingly important adjunct to asset-backed securities transactions that are conducted on other exchanges as well as the interbank market.
Chinese regulators have pointed out however that the market has recently seen the “disorderly expansion of fake financial asset exchanges,” creating a “grey area for non-standard financing” that can be exploited by third party wealth management companies and real estate enterprises to access illicit funding channels.
CSRC said that specialist rectification work in relation to financial asset exchanges has been ongoing for more than a year. On 17 December Chinese authorities issued a letter to 29 province-level governments concerning their financial asset exchanges, calling for them to immediately arrange for local financial authorities to undertake on-site inspection work.
Domestic observers say that tighter scrutiny of financial asset exchanges marks the removal of a final area of non-standard finance in China, in the wake of major reform of asset management regulations over the past several years.