As financial institutions targeted China’s economic growth at 8% for 2021, we expect stronger performance from China auto ABS and RMBS this year.
However, performance had not returned to pre-pandemic period, with regional economic disruption and falling consumer activity caused by a recent resurgence of Covid-19 cases in some cities and the reintroduction of containment measures, including clamping down on going home during the Chinese New Year holiday.
Despite the covid-19 pandemic, China’s total ABS issuance in 2020 still rose 23% year-on-year, reaching 2.9 trillion yuan (USD444 billion). This was mostly issued by corporates backed by account receivables.
Issuance by financial institutions fell by around 13%, due to lower issuance of RMBS and credit card transactions. Passenger vehicle sales registered a mild decrease of 6% in 2020, which supported auto ABS issuance on par with the 2019 level.
Therefore, China’s auto loan ABS is expected to remain flat and modest, supported by low-single-digit growth in auto sales over the next few years and a continuous uptick in auto loan penetration rate.
China’s auto industry is showing greater momentum than we anticipated, suggesting a different recovery path to that in Europe and North America. We view China as the first country to emerge from the pandemic and is the only market that is able to restore auto sales to 2019 volumes by the end of 2022.
As for the new China auto ABS issuance, Toyota Motor Finance plans to launch its Toyota Glory 2021 phase auto loan securitization this week. The originator will open the onshore auto ABS market after the Lunar New Year break with a Rmb5bn ($774m) transaction — its largest to date.