Beijing has allowed two state banks, China Development Bank and China Construction Bank, to become China's leading issuers of asset-backed and mortgage-backed securities in a pilot program, state media reported, citing the central bank. The banks are expected to pave the way for Chinese banks to turn non-liquid assets, such as mortgages, into more liquid assets, such as securities that can be traded in capital markets. China's banks have been studying how to use more sohpisticated financial instruments to reduce credit risks arising from overexposure to certain types of assets. Some experts have said China is not ready for securitization transactions, citing the country's underdeveloped legal and regulatory regimes.
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