CHINA Trends and Developments Contributed by: Qiao Zhaoshu, Chen Jie and Terri Wang, Beijing Docvit Law Firm
Innovative Trends in Enterprise Asset-Based Financing and the Role Lawyers Should Play Policy and market drivers transforming corporate financing Traditionally, enterprises have relied on capital credit for market financing, customer acquisition, business development, and shareholder value creation. The promulgation of China’s new Company Law is accel- erating a shift from a capital-based to an asset-based credit model. In recent years, beyond conventional equity and debt channels, enterprises have increas- ingly adopted asset-centric instruments such as asset securitisation, REITs-like products, and asset-backed securities (ABS). Public infrastructure REITs (C-REITs), held-to-maturity ABS, and joint ventures with buyback obligations are now widely used. As Web3.0 technolo- gies continue to permeate commercial practice, some enterprises are also exploring data-asset financing and tokenisation of real-world assets (RWA) to revi- talise assets. Since May 2025, under the innovation-driven develop- ment agenda, the People’s Bank of China (PBoC), the China Securities Regulatory Commission (CSRC), the National Association of Financial Market Institutional Investors (NAFMII), and the Shanghai, Shenzhen, and Beijing stock exchanges have introduced poli- cies allowing equity investment institutions to issue Technology Innovation Bonds. Qualified private equi- ty, venture capital, and industrial equity investment institutions – and their parent companies – may issue bonds to (i) establish or expand private equity funds or (ii) make direct equity investments in eligible technol- ogy enterprises. This framework helps ease financing bottlenecks in equity investment – especially for high- growth tech companies – by channelling more stable medium-to long-term capital into the sector. Amid a shortage of yield-generating assets, publicly offered C-REITs continue to expand, showing mark- edly improved liquidity and trading activity. Consump- tion-related infrastructure and affordable rental hous- ing have become preferred asset classes, providing credible exit channels and supporting a virtuous cycle of “invest-finance-build-manage-exit.” Distinct from traditional REITs-like products, held-to-maturity ABS has emerged as a transitional product from Pre-REITs to public C-REITs, and is attracting significant institu-
tional interest. Backed by the operating cash flows of real-estate/infrastructure projects, these transactions typically use a “special purpose plan (SPP) + project company” structure to achieve a true sale. Where the underlying assets meet the public REIT issuance crite- ria, a public REIT fund may acquire 100% of the SPP securities, thereby converting the held-to-maturity ABS into a public REIT holding. Held-to-maturity ABS can be more issuer-friendly, addressing the main pain points of public REITs, such as high entry thresholds, lengthy timelines, large minimum deal sizes, and strict maturity/compliance requirements. To attract a broad- er investor base and reflect their equity-like attributes, held-to-maturity ABS are commonly tranched into senior, mezzanine, and subordinated notes, enabling more flexibility in the allocation of returns and risk. Infrastructure and other large-scale projects demand significant capital, long payback periods and entail elevated risk. In practice, project companies often introduce external investors via capital increases or joint ventures, allocating equity pro rata to their con- tributions. Investment agreements may grant founders a right of first refusal (ROFR) over investor shares after a defined period, with so-called rights-maintenance or option-maintenance fees payable annually to pre- serve such rights. Debt-like infrastructure deals (eg, certain REITs-like products and some SOE-sponsored projects) frequently combine multiple layers of credit enhancement – such as rights-maintenance fees, shortfall undertakings, and joint and several guar- antees – some at the SPP level and some at the project-company agreement level. However, overly strong credit enhancements may render the product de facto principal-protected, which could jeopardise off-balance-sheet recognition of the underlying asset for the originator. This accounting treatment, as well as the various taxes and fees that may be incurred when the asset is removed from the balance sheet, will be key to the project՚s ultimate success. If an asset is successfully listed as a REITs-like product and the financing proceeds remain on the issuer’s balance sheet as a liability along with an additional tax burden, the issuer may lose the incentive to pursue the list- ing. As first-round investors approach their exit while projects are still under construction or newly opera- tional, the limited availability of distributable cash can constrain capital-reduction exits. Market practice thus
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