Study On The Development Of Mortgage-Backed Securitization In China

In recent years, real estate industry of China is very prosperous. It should not be ignored that the financial channels of the real estate market of China are still very narrow due to the lack of multi-level capital support system and of risk-share system. The capital demands of the real estate industry's development are mainly financed by the commercial banks nowadays. In order to eliminate the risk of finance, the method of residential mortgages-backed securitization (MBS) was introduced into China in 2005. But the progress of MBS achieved since then is dissatisfied. Both commercial banks and investors are disinterested in MBS and there are little transactions of MBS in the second-hand market.At the beginning, the author analyzes the models of USA, UK, Japan, and Hong Kong and finds that the government-dominant MBS model of USA is better than the others.From the analysis of sub-prime MBS crisis in USA 2007, we can see that the cause of the crisis is not from the government-dominant system, but from the over-spread credit of banks which delivered sub-prime mortgages to those who have little abilities to pay the debt. Conversely, the SPV operated by the government lowed down the impact of the crisis.The paper examines the reasons of the slow development of MBS market in China and argues that it is mainly due to the lack of market activists, the incomplete law systems, and the poor amounts of investors. It's reasonable to solve this dilemma from both government and market itself.With the reference of international experiences of MBS and the lessons of sub-prime crisis in USA, the author argues that the government should take active role in the MBS process and establishes the system of independent SPV, credit agents, and professional mortgage banks. In addition, the role of market itself should not be ignored. The threshold of investors in MBS market should be lowed down in order that as many as investors can enter the market. It's necessary that the MBS banks should censor the application of mortgage carefully to avoid the risks of default of MBS.