Real Estate Prices, Bank Credit Support And Regional Financial Stability

The lesson of the Subprime Debt crisis and upswing of China’s real estate market in the prior time has drawn people’s attention to the real estate market. This thesis aims to explore the interaction mechanism between bank credit and real estate price fluctuation and to analyze the factors that affect quality of bank credit theoretically. Based on the figures of Beijing, Tianjin, Ningbo, Shanghai, Shenzhen and Chongqing, an empirical study has been undertaken to verify some hypothesis. The research shows that rising of property price leads to the expansion of credit. However, once over-valued real estate price falls or tends to fall, market risk spreads to other fields faster and more strongly, with the result of worsening of bank credit, increase of risk in banking system and regional financial market. Therefore, it is better for the government to release accumulated risks of real estate market step by step, avoid over-fluctuation in prices and maintain the steady and sustainable economic development.