The U.S.A.'s Subprime Mortgage Crisis And China's Strategy

Economic globalization is the basic characteristic of today's world. As a result of world scientific and technological revolution and development of market economy, economic globalization became the tide of history which can not be transferred by man's will. Advanced electronic information technology and huge capital network have made the world a small "global village". America is the most developed country, whose strong economy and developed financial market have always been the focus of scholars' study, the target of capital chasing and a good example for all countries. However, with the economic globalization, financial risks have become everywhere and often show up with the face of crisis.Since July 2006, the American subprime mortgage crisis started to arise and then further spread, causing great impact to the American and European financial markets. The stock market of other parts of the world can not neither escape the impact. Chinese financial market has been affected just a little because Chinese capital account is still not convertible and the cross-border flow of capital is limited. However, China now is faced with the situation of excess liquidity and sharp rise of assets' prices and is in the cycle of interest rate increases, so the subprime mortgage crisis has sounded a warning to the increasingly open financial sector and price-soaring real estate market of China.First, this paper proposed the issue to study, and described the current situation of domestic and foreign study on the subprime mortgage crisis, main points of this paper and the contribution of this paper.Second, this paper described the background of American subprime mortgage crisis and mainly analyzed the defects of operating mechanism of subprime loan. It also analyzed the question how the downfall of the real estate market triggered the credit risk. Based on the analysis, this paper proposed four important ideas as following. Fluctuations in the real estate market were the predisposing factor of subprime mortgage crisis. Non-standard of subprime mortgage market and the defects of operating mechanism was the internal factor of the crisis. The absence of government supervision and weakening intermediary independence was the external factor of the crisis. Low savings rate was the root of the crisis. Furthermore, this paper analyzed what lessons should we take from the crisis and its inspiration to us.Finally, through analyzing the homogeneity and differences between subprime mortgage markets of China and America, this paper came to a conclusion that the root of the same kind of crisis does not exist in China, but the potential risk should not be neglected and requires stronger monitoring and management to prevent from crisis.