The Pass-Through of the Risk Within the Asset-Backed Securitization in China Taking the Huaxia Bank as an Example

Asset-backed security (ABS) is a financial instrument like a bond that pays principal and interest to investors from the cash flow or residual equity generated by the underlying asset pool. Unlike stocks and general bonds, asset-backed securities are not claims on the interests of an operating entity but on the cash flow and residual equity generated by the underlying asset pool, a security backed by the asset's credit. China's asset securitization products mainly include credit asset securitization, enterprise asset securitization, and asset-backed bill (ABN), among which the credit asset securitization and enterprise asset securitization stock scale are relatively large. The paper investigates the Asset-backed security market in China, focusing on its development. Using Huaxia Bank as a case study, we research the structure, participants, risk transfer mechanisms, and regulation of ABS.