Low-cost local debt new pathway: Issuing RWA guidelines in Hong Kong through the "CSRC No. 1 Document"

Written by: Zhao Xuan, Rao Weitong

By 2026, local government debt resolution enters a critical deep-water phase. The traditional “new borrowing to repay old” approach becomes increasingly narrow, and the high costs of non-standard financing put immense pressure on local state-owned enterprises.

Fortunately, in February 2026, eight ministries jointly issued new regulations, opening a compliant pathway for domestic assets to go overseas through RWA (Real-World Asset Digital Issuance) for the first time.

This not only signifies a breakthrough in financial technology within asset securitization but is also viewed by the market as a strategic tool tailored by the state to revitalize existing local assets and connect with low-cost overseas funds.

This article will analyze how to legally and compliantly transform solid assets within the urban investment system into freely tradable funds in the Hong Kong capital market, from both business logic and legal compliance perspectives.

The “Triple Gates” faced by urban investment debt transformation

Although the national level has allocated implicit debt replacement quotas, the real challenge for urban investment transformation lies in resolving the massive “operational debt.”

Currently, urban investment platforms are generally trapped by the “Triple Gates”:

First, the cost pain point—interest payments are eroding profits. To maintain an unbroken capital chain, many platforms rely on high-cost non-standard financing such as trust and leasing at annual rates of 8%–12%. As a result, the income from real projects often cannot even cover the financing interest, causing the debt snowball to grow larger.

Second, the channel pain point—assets are available but cannot be monetized. Urban investment platforms do have quality assets like water plants, toll roads, and industrial parks. However, these assets often lack complete historical rights confirmation or have no independent operating entities for a long time. In the eyes of traditional banks, they become “dead assets” that cannot be mortgaged.

Third, the threshold pain point—public REITs are attractive but far from solving immediate needs. The threshold for issuing public REITs is very high: underlying assets often require over 1 billion yuan in scale, with compliance review comparable to A-share listings, taking one or two years to complete, which cannot meet the urgent capital needs.

Faced with these three dilemmas, urban investment must break out of traditional indirect financing thinking, leverage the latest national policies, and turn their attention to more flexible mechanisms in cross-border capital markets to find truly effective incremental funds.

Policy breakthrough—what is RWA? Why is this the best window now?

1. Underlying technology: the business and legal essence of RWA

Setting aside complex technical jargon, RWA is essentially a “miniature version of REITs abroad” or “cross-border asset securitization based on digital certificates.”

Its operational logic is straightforward: legally detach the underlying assets that generate stable cash flows—such as future revenue rights of a water plant over the next five years—from the urban investment platform. Then, discount and package these future earnings into compliant digital certificates, which are sold to global professional investors on a strictly regulated Hong Kong exchange.

2. Clear benefits from dual-track regulation

For local decision-makers, financial innovation must prioritize compliance.

On February 6, 2026, regulators issued two documents simultaneously, clearly defining the path:

One side is the “closing door”: the People’s Bank of China and other ministries issued the “Notice on Further Preventing and Disposing of Risks Related to Virtual Currencies” (Yinfa [2026] No. 42), cracking down on illegal virtual currency speculation domestically—making it clear that virtual is not a substitute for real assets.

The other side is the “opening door”: the China Securities Regulatory Commission (CSRC) issued the “Guidelines on Regulating the Overseas Issuance of Asset-Backed Securities and Tokens Based on Domestic Assets” ([2026] No. 1), officially permitting compliant cross-border issuance.

This simultaneous tightening and loosening send a clear signal: virtual speculation is firmly suppressed, while real financing is encouraged. As long as domestic high-quality assets are pre-registered with the CSRC, they can go to Hong Kong for cross-border financing via digital means.

Economic rationale—why is RWA the “magic bullet” for debt relief?

Ultimately, the core motivation for urban investment platforms to conduct RWA in Hong Kong is to replace more expensive debt with cheaper funds. Let’s compare three sets of data for clarity:

First, costs:

Domestic non-standard financing typically has an annual interest rate of 8%–12%, which is very high; in contrast, Hong Kong RWA issuance can achieve 4%–6% because it taps into the global capital pool, significantly reducing financial costs.

Second, thresholds:

Domestic bond issuance or REITs require underlying assets of at least 1 billion yuan, with complete and flawless procedures; RWA is much more flexible, starting from 300–500 million yuan, and is more tolerant of historical rights issues—meaning that assets of moderate size, previously difficult to activate, now have a chance.

Third, speed:

Traditional domestic financing takes one or two years to approve, which is far from meeting urgent liquidity needs; RWA, with complete documentation, can theoretically be registered and issued within 20 working days—an emergency-level pace for distressed urban investment platforms.

A practical example:

Suppose an urban investment platform raises 500 million yuan equivalent overseas via RWA in Hong Kong, directly replacing domestic high-interest non-standard debt at 10% annual rate.

The result? The enterprise saves approximately 20–25 million yuan annually.

This is not just paper profit; it’s real financial cost savings reflected directly in the profit statement—an essential “cash flow remedy” for stressed urban investment platforms.

Building a secure compliance firewall—how to ensure absolute safety?

Cross-border financing involves two red lines: state-owned asset security and data compliance, which must not be crossed. As professional consultants, we have set up three “firewalls” to ensure full compliance:

First: separation of ownership and income rights to prevent “state asset loss”

We sell not the assets themselves but the income rights for a specific future period. In other words, the ownership of land, operational control, and daily management remain with the platform; overseas capital only collects revenue and cannot interfere with the core assets. State asset control remains fully intact.

Second: “Privacy computing” to safeguard “data export” bottom line

Financing requires disclosure of operational data to investors, but private data must stay within China. We strictly follow the Data Security Law, using privacy computing technology to anonymize data—overseas only sees encrypted summary reports (e.g., total cash flow), without personal details. A dedicated “Data Export Evaluation Report” from law firms ensures compliance.

Third: Transparent, closed-loop supervision—full process “sunshine”

The entire process is transparent:

Domestic side: only high-quality, self-sustaining assets are selected; implicit debt is strictly avoided. Before project initiation, complete filing with the CSRC.

Overseas side: only cooperate with licensed Hong Kong SFC institutions, with anti-money laundering checks in place; products are sold only to compliant institutional investors.

Funds: foreign currency raised is converted through a designated account under the State Administration of Foreign Exchange, operating in a fully closed manner, with every penny used solely to replace high-interest old debt—strictly dedicated funds.

With these three firewalls in place, “dead assets” are truly revitalized into “low-cost active funds.”

Operational roadmap—“Five-step” implementation guide

To translate macro policies into practical actions, we have outlined a standardized implementation path:

Step 1: Asset screening

Prioritize small- to medium-sized assets with stable cash flows and clear ownership (e.g., water fee rights, public parking lots, industrial park rents), starting from 300–500 million yuan.

Step 2: Structural reorganization

Establish a special purpose vehicle (SPV) to isolate underlying assets from the parent urban investment company; consider introducing provincial guarantee groups for credit enhancement to further lower issuance costs.

Step 3: Compliance filing

Engage professional law firms to issue legal opinions and submit the “No. 1 Document” filing application to the CSRC; if smooth, obtain cross-border issuance approval within about 20 working days.

Step 4: Hong Kong issuance

Partner with licensed Hong Kong financial institutions to confirm asset income rights and generate compliant digital certificates, then sell to global investors. Use foreign exchange swaps to hedge currency risk.

Step 5: Currency conversion and debt replacement

Convert raised funds into RMB and deposit into designated regulatory accounts, immediately used to replace high-interest urban investment debt, completing a cost reduction and efficiency improvement cycle.

Conclusion: Seize the “first-mover” advantage and set a benchmark for debt relief achievements

Looking back at each policy window in the capital market, regions that act first often enjoy the greatest “first-mover” benefits and ample funding support.

Currently, with the implementation of the “CSRC No. 1 Document,” the blue ocean of cross-border RWA has just begun.

We recommend that local governments and urban investment platforms act early: select a high-quality asset with stable cash flow and moderate scale to pilot the process. Once the compliant pathway is established, low-cost overseas funds can replace high-interest old debt, not only alleviating immediate liquidity pressures but also setting a pioneering example of “digital financial innovation” in debt resolution.