Assetization: The Chinese Path to Housing Financialization

Abstract

Although the literature on the financialization of housing pays most attention to mortgaged and securitized homeownership and the penetration of capital into subsidized rental housing, forms of financialization are varied. In China, housing commodification and privatization has underpinned a growth in homeownership. One of the outcomes of financialization of housing is the transformation of owner-occupied housing into a financial asset for households’ wealth. Despite a relatively low level of residential mortgage lending in China, both the absolute volume of mortgages and the proportion of gross domestic product they represent are now rising. Housing value appreciation has driven a significant increase in the financing of housing consumption through multiple channels. This article examines these channels and suggests that the financialization of housing in China is a critical part of the country’s overall development model. It is further argued that the root of housing financialization in China is not mortgage securitization but the creation of owner-occupied housing as a financialized asset to propel the wider financialization of the Chinese economy in the context of state-controlled financial environment.