China’s green-bond market has grown rapidly in recent years and is now second in size only to the U.S. Understanding the reasons behind this market’s growth and performance may help investors as they consider incorporating Chinese green bonds in portfolios.

The market in Chinese residential mortgage-backed securities is growing, as global investors are eying the segment’s relatively high yield and potential for diversification, but seeking improved credit ratings and transparency in data and pricing.

After the U.S. COVID-19 lockdown, new monthly remittance reports for asset-backed securities indicated performance deterioration and signaled potential challenges ahead. Meanwhile, in China, ABS showed signs of recovery.

Beyond COVID-19’s steep human toll, the pandemic’s disruption of economic life has led to widespread loss of income and impaired some borrowers’ ability to repay loans. What could the impact be for investors in consumer asset-backed securities in the U.S. and China?

The slowing Chinese economy and trade uncertainty had already put strains on the performance of Chinese consumer asset-backed securities. The COVID-19 pandemic could further harm the performance of these securities. Investors may wish to gauge the risks.

The phase-one U.S.-China trade deal lets U.S. asset managers acquire nonperforming loans directly from Chinese banks. We assess the market’s characteristics, as investors face challenges estimating recovery rates and liquidation timing of these loans.

The default rate for auto loans in Chinese consumer asset-backed securities increased rapidly in recent months, and China may be moving toward a more borrower-friendly bankruptcy regime. Could this   lead to even higher default rates?