Study On Transactional Intervention In Chinese Housing And Housing Finance Market On The Basis Of US-Canada Comparison

Due to economic ethics and the indivisibility of a nation, it is just for government to intervene markets. Moreover, due to the weakness in decision-makers' rationality and self-interest and the indivisibility of society, it is necessary for government to intervene markets. The intervention in the Chinese housing market since 2005 shows that administrative orders, taxation, mortgage down-payment, mortgage rate and deposit reserve ratio are the regulation tools that can be used by the Chinese government. Though administrative orders are a powerful and handy tool to the government as a result of its traditional strengthful and leading position in Chinese economy, the fact that the government is in market economy requires it regulate markets indirectly. The government's emphasis on information system and distribution, as well as the fact that the government tried to rely on indirect tools such as taxation and housing loans has demonstrated that it has the desire to guide the market with economic principles. However, administrative orders made with such a high frequency tell lack of transactional intervention tools. Hence, it is necessary to study on transactional interventions applicable in Chinese housing and housing finance markets.The paper compared and analyzed the Canadian and US transactional intervention experience. It concluded the basic intervention principles, modes and ways. It pointed out that government shall follow the rule of fairness and balance when intervening markets; that to intervene housing market, the best market to step into is housing finance market; the best intervening mode is mortgage insurance business carried out by a state-owned and state-run agent; that where a government chooses to supply the public product of the stability of housing finance market, it may choose from announced credit guarantee and occasional credit guarantee.When these conclusions are applied to China, for the purpose to improve housing affordability, the government shall establish a relatively independent state-owned and state-run corporation whose core business is mortgage insurance and do transactional intervention in the housing finance market via the agent as a shadow trader. The government may guarantee wholesale finance tools so as to provide sufficient low cost funds for the primary housing finance market, however, it must be cautious against the negative effect of the function of risk-distribution of wholesale finance.The paper evaluated the applicability and utility of mortgage insurance in China from information environment, political and social environment, legal environment, the business environment of the primary housing finance market and the supporting system. Business environment has been prepared for mortgage institutions in China. Furthermore, a transactional intervention tool focusing on mortgage insurance business will do good to the proper operation of Chinese housing and housing finance market.When the Corporation is being designed, the major problems that shall be resolved are to determine operation targets, to guarantee the Corporate's control over lenders, to balance the government's control over the corporation's operation and the relative independence of the Corporate against the government, to realize rigid external risk control and inner and external supervision over the Corporation, to make the Corporation operate sustainably and to deal with the Corporation's competition with private mortgage insurance institutions. The law that mortgage insurance institutions are subject to shall covers risk capital management, business risk management, adverse selection prevention, reasonable pricing of mortgage insurance products, consumer protection, and that public funds shall be directed to the targeted population.