Asset securitization -- a landmark initiative in China's financial markets -- was finally accepted by the country's authorities.

The People's Bank of China, the central bank, announced Monday that the China Development Bank (CDB) and China Construction Bank (CCB) will be pilot institutions for the plan.

Asset securitization, generally, is the transformation of non-liquid assets into securities; for example, into an instrument that can be traded in a capital market.

The CDB, a policy bank whose loans largely go to construction of infrastructure, was given the green light to securities its loan assets, while the CCB, one of the country's Big Four state-owned commercial banks, will launch the asset securitization move backed by its housing mortgage loans, a central bank spokesman said.

The decision was made after the country's financial regulators and other State departments held a joint work meeting Monday, he said.

Some Chinese mainland asset management firms have tried, in recent years, to ensure the success of securitization.

Last October, China International Capital Corp Ltd. (CICC) and China Cinda Asset Management Corp (CCAMC) signed an agreement on the disposal, by using asset securitization, of non-performing assets (NPAs). The pact involved 20 billion yuan (2.4 billion US dollars).

Before that, China Huarong Asset Management Corp launched a quasi-securitization product, which raised 1 billion yuan (120 million dollars).

Securitization, which originated in the United States in the 1970s, has become a major financial instrument in modern finance. It bridges the currency and capital markets. It also translates, eventually, assets into a cash flow, which is of vital importance to investors and the financial market.

Analysts point out that China does not have a specific securitization-related law, which will hinder development of the industry.

But the central bank spokesman said relevant State departments will work together to map out "well-conceived" policies and rules for asset securitization.