Abstract
The residential mortgage market in China has been evolving rapidly with the swift housing system reform over the last decade. China has set up a housing finance system with unique Chinese characteristics: the system is operated through both the policy-driven housing finance channel – the housing provident fund (HPF) – and market-oriented housing finance channel – the commercial banks’ mortgage loans. The state-owned commercial banks play a major role in residential mortgage market in China. The mortgage risks in terms of borrowers’ prepayment and default in China are quite different from those observed in the United States or other developed countries. The regulation over mortgage lending practice such as treatment of foreclosure is also quite different from what is familiar in the more developed market. The securitisations of real estate property–related debt and equity, such as mortgage-backed securities and real estate investment trusts (REITs), have been emerging in recent years.
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