Abstract
The US subprime mortgage crisis, which started in August 2007, has been the cause of worldwide financial turmoil. Not only have the US banks suffered, nearly all financial institutions around the world were affected because of their investments in Mortgage Backed Securities (MBS). However, the response from the Chinese government was relatively calm. As China’s financial sector becomes more integrated into the world economy, there is increasing interest in understanding the influence of the US housing crisis on the Chinese banks and its wider economy. To what extent is the Chinese banking sector exposed to the US subprime mortgage market? Might such an exposure spill over into China’s financial sector? What are the actions taken by the Chinese government in response to the newly issued Basel III Accord? These are the issues that are addressed in this chapter.
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