Sub-loan Crisis Of America And Its Effects To Chinese Real Estate Market

With the second largest American subprime loan institution, New Century Financial Corporation, went bankrupt, subprime loan crisis emerged. A short period of one year, subprime loan risk was completely exposed with housing mortgages and loan corporations close to bankruptcy, hedging funds forced to be liquidated and investment banks proclaiming their losses. Moreover, commercial banks and insurance institutions also suffered great loss and global stock market declined in response. Trust risk aroused by subprime loan, eventually, evolved into a global financial crisis.What does China, as a principal part of the world economy, learn when facing the rapid growth of Real Estate Market? And how to avoid happening similar emergence of credit crisis is an important problem. This article wants to give some advice for it by analyzing the reason of crisis.It includes four contents:The first part presents sub-loan crisis and the process of its break. Sub-loan crisis is that sub-borrowers defaulted so causing lending institutions can not operate normally.From HSBC extracting 1.8 billion dollars bad debts to Fannie Mae and Freddie Mac falling into deficit, sub-loan crisis have resulted in large losses for a lot of financial institutions, even in real economy.The second part analyses the reasons of sub-loan crisis.In essence, the reason of sub-loan crisis is that the person who is unable to undertake the debts or poor in personal credit history acquires loans.The other reasons of sub-loan crisis are the existence of sub-loan market, volatility of house price, the bubble of asset investment, the weaknesses of credit assessment and ineffective government monitoring.The third part expounds the influences of Chinese real estate market caused by sub-loan crisis.The fallen of house price all over the country, not only affects the sales of house, but also affects the confidence of house buyers. At the same time, sub-loan crisis accelerates the adjustment of Chinese real estate market. Facing the impact of sub-loan crisis, commercial banks have also changed the concept of mortgage operating and strengthened risk controlling.The last part gives some suggestions to avoid sub-loan crisis for China. Combining with the status quo of real estate, we find that the similar economic backgrounds like sub-loan crisis also exist in China. But the tremendous demands for housing and purchase concept determine that it is impossible for China to take place large-scale crisis like America.But, the crisis also tells us that the more prosperous, the more careful for us, in order to prevent the sub-loan crisis, we must do the following:1. Inhibit price fluctuations, keep the stability of house price, establish the emergency response mechanism of real estate prices.2. Pay close attention to the developments in the real estate market, in order to guide to rational investment and consumption.3. To strengthen the measurement and management of mortgage credit risk, prevent the outbreak and spread of risk.4. Establish and improve the personal credit system, reduce the possible occurrence of default operating from the system.5. To strengthen the social responsibility of the real estate agency, provide an objective, fair and reasonable evaluation for mortgage review.6. The risk controls of bank must be more strict.7. In order to protect the risk of the real estate market, we should learn and use more finance tools.