This report does not constitute a rating action.
Key Takeaways
- We expect issuance in China's structured finance market to stay flat at Chinese renminbi (RMB) 2 trillion in 2025, given the current economic conditions.
- Lease asset-backed securities (ABS), consumer loan ABS, and small loan ABS exhibited strong momentum in first-quarter 2025.
- Collateral performance remained mixed in the first quarter of 2025. We expect tariff impacts will vary by asset classes, based largely on whether the effects are direct or more indirect in nature.
- We believe the main transmission channels for any potential deterioration in collateral performance will stem from tariff-related impact on macroeconomic factors such as rising unemployment and lower economic growth.
Chart 1
Chart 2
Chart 3
Issuance trends for different schemes
- Credit ABS scheme (CAS) managed by the National Financial Regulatory Administration of China and the People's Bank of China (PBOC) totaled RMB23 billion in first-quarter 2025, down 40% year on year. This is mostly due to a slowdown in auto loan ABS and micro and small enterprise (MSE) loan ABS issuance.
- Issuances under the China Securities Regulatory Commission (CSRC) scheme increased 35% year on year to RMB274 billion in first-quarter 2025.
- Issuances under the National Association of Financial Market Institutional Investors (NAFMII) scheme surged 59% year on year to RMB101 billion in the same period.
- NAFMII issuances continued the momentum that began in 2023, when regulatory dynamic evolved. Consumer loan ABN issuances under NAFMII increased 103% year on year in the first quarter of 2025.
Chart 4
Auto loan ABS yields
- The latest one- and five-year loan prime rates (LPRs) remained unchanged at 3.1% and 3.6%, respectively, before the PBOC announced a policy rate cut in early May.
- The six-month Shanghai Interbank Offered Rate (SHIBOR) saw a mild increase to 1.92% in March 2025 from 1.7% in December 2024.
- Coupons on the most senior tranches of auto loan ABS remained stable at 1.7%-1.83% in the first quarter of 2025. A repeated issuance priced in that quarter saw similar level of coupon rates compared with the fourth quarter of 2024.
- Future yield trend will depend on policy initiatives. In May, the PBOC announced that it will lower the reserve requirement ratio by 50 basis points (bps) and the seven-day reverse repurchase rate to 1.4% from 1.5%. PBOC expects the policy rate reduction to lead the LPR down by 10 bps.
Chart 5
Auto loan ABS issuance
- Auto loan ABS issuance under the CAS scheme fell 65% year on year in the first quarter of 2025 to RMB7.2 billion.
- Slow auto sales, falling loan penetration, and active issuance of financial debentures likely contributed to the drop.
- Competition intensity from banks may have peaked as costs reach unsustainable levels. In response to intense competition, auto finance companies offered more diverse products with features such as longer tenor, low loan-to-value, and value-added products.
- Auto ABS issuance looks set to decline further in 2025, considering our projection of flat light vehicle sales and a declining auto loan penetration rate.
Chart 6
Chart 7
Chart 8
Auto loan ABS performance
- Early arrears of auto loan ABS saw a minor increase in the first quarter of 2025. Weighted average 61-90 days delinquency rate rose by 4 basis points to 0.13% as of March 31, 2025, from 0.09% as of the end of 2024.
- Delinquency rates stabilized because a few of the worst-performing transactions have been paid down.
- Transactions’ performance varied, reflecting originators’ underwriting and loan characteristics.
- We expect arrears to remain elevated in 2025. In addition, the indirect impact from tariffs will soon weigh on asset performance.
Chart 9
Chart 10
RMBS Issuance
- RMBS issuance has been absent since February 2022.
- We expect RMBS issuance to remain stalled in 2025, considering a persistent downturn in the property market and sluggish mortgage originations in China.
- In our view, issuance will not resume until the property market recovers meaningfully and mortgage loan origination picks up for a few quarters.
- While stimulus measures announced by the Chinese government in the fourth quarter of 2024 provide some support to the property market, it will take time for these policies to have a significant impact.
Chart 11
RMBS Performance
- As of the end of first-quarter 2025, there were 199 RMBS outstanding, with an aggregate pool size of RMB182 billion.
Chart 12
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Chart 14
Consumer loan ABS issuance
- Consumer loan ABS under the CAS scheme fell 32.5% year on year in the first quarter of 2025 to RMB3 billion. The decline is likely because issuers turn to financial debentures as an alternative fundraising channel.
- Tariff may indirectly weigh on the credit quality of consumer loans. This may further affect consumer loan originators’ loan growth plan this year, consequently financing needs and ABS issuance plan.
- Regulatory stance is one of the important factors that affects consumer loan ABS issuance. Regulatory dynamic has seemingly been supportive over the past few quarters and will likely remain so.
Chart 15
Consumer loan ABS performance
- The delinquency rates of consumer loan ABS tend to be higher and more volatile than most auto loan ABS, based on our observation of selected transactions. This volatility is generally mitigated by the relatively high credit enhancement level in consumer loan ABS.
- For the rated Anyihua series, excess spreads were used to purchase new loans during the revolving period. This created further overcollateralization and increased the credit enhancement of the rated notes.
- All three transactions showed in the chart have been fully paid down.
Chart 16
Annual Review* In January-March 2025
| Transaction name | Date |
| Silver Arrow China 2023-1 Retail Auto Loan Asset Backed Notes Trust | March 26, 2025 |
| Silver Arrow China 2024-1 Retail Auto Loan Asset Backed Notes Trust | March 26, 2025 |
*In an annual review, S&P Global Ratings reviews current credit ratings against the latest issuers/issues performance data as well as any recent market developments. Annual reviews may, depending on their outcome, result in a referral of a credit rating for a committee review, which may result in a credit rating action. The above list is not an indication of whether or not a credit rating action is likely in the near future.
Related Research
- China Property Watch: Rebooting An Economic Engine, May 11, 2025
- Credit Conditions Asia-Pacific Special Update: U.S.-China Ties In Uncharted Territory, April 15, 2025
- China Consumer Outlook: A Pressing Policy Initiative Takes Shape, April 15, 2025,
- China's Car Sector: A Shakeout Looms, April 1, 2025,
- Economic Outlook Asia-Pacific Q2 2025: U.S. Tariffs Will Squeeze, Not Choke, Growth, March 26, 2025
- Surging Secondary Sales To Stabilize China Property In 2025, Jan. 22, 2025,
- China Structured Finance Outlook 2025: A Few Sectors Take Off Amid Overall Stagnant Issuance, Jan. 8, 2025,
- A Primer On China's Micro And Small Enterprise Lease ABS Market, Oct. 10, 2024,
- Update On A Comparative Overview Of Select China Consumer Loan ABS, Aug. 9, 2024,
- Credit FAQ: What's Behind Our First 'AAA (sf)' Rating Assigned To Chinese Exchange ABS, May 9, 2024,
- How We Rate China Leasing Securitizations, Oct. 11, 2023,
- What's Behind The First 'AAA (sf)' Rating Assigned To Chinese Consumer, Aug. 24, 2023
- A Primer On China's Consumer Loan ABS Market, June 9, 2023,
- A Primer On China's MSE Loan ABS Market, May 9, 2023,
- A Primer On China's Equipment Lease ABS Market, March 2, 2023,
| Primary Contact: | Patrick Chan, Hong Kong 852-2533-3528; patrick.chan@spglobal.com |
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| Andrea Lin, Hong Kong 852-2532-8072; andrea.lin@spglobal.com | |
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