Impact of the US credit crunch and housing market crisis on China

Journal of Contemporary China

Volumn 19, Issue 64, 2010, Pages 401-417

  Yao, Shujie ^a   Luo, Dan ^a   Morgan, Stephen ^a  

^a UNIVERSITY OF NOTTINGHAM NINGBO CHINA   (China)

Author keywords

[No Author keywords available]

Indexed keywords

CREDIT PROVISION; ECONOMIC GROWTH; FINANCIAL CRISIS; FINANCIAL SYSTEM; HOUSING MARKET; INTEREST RATE; MORTGAGE LENDING; UNDERDEVELOPMENT; URBANIZATION;

CHINA; UNITED KINGDOM; UNITED STATES;

EID: 77649200968     PISSN: 10670564     EISSN: 14699400     Source Type: Journal    
DOI: 10.1080/10670560903444355     Document Type: Article

References (35)

1. A. Batson, 'China sets big stimulus plan in bid to jump-start growth', Wall Street Journal (Eastern Edition), (10 November 2008), p. A1.
2. S. Chen, 'Chinese banks may take losses on sub-prime', Forbes.com, available at: http://www.forbes.com/ markets/2007/08/03/asia-subprime-exposure-markets-equity-cx_jc_0803markets1.html (accessed 8 March 2007).
3. These mortgages include adjustable rate mortgage (ARM), interest-only ARM and negative amortization loans. ARM is a mortgage loan which adjusts the interest rate periodically. The negative amortization loan means that based on some pro-agreed terms, the loan payment for a period can be less than the interest charge.
4. B. S. Bernanke, 'Fostering sustainable homeownership', speech at National Community Reinvestment Coalition Annual Meeting, Washington, DC, available at: http://www.federalreserve.gov/newsevents/speech/bernanke20080314a.htm (accessed 14 March 2008).
5. Case Shiller Data File, 'S&P/Case-Shiller Home Price Indices', Standards & Pool's, available at: http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html.
6. G. Stamp, 'Credit crunch a year on: the losers', BBC News Channel, (3 August 2008).
7. Anonymous, 'Business outlook: UK', Business Europe, New York 49(8), (2009), p. 4.
8. 'USA finance: banks likely to need much more support', EIU ViewWire, New York, (4 May 2009).
9. H. Zhong, 'Estimated losses of six listed Chinese commercial banks could reach RMB4.9 billion', Capital Weekly, (11 August 2007) [in Chinese].
10. J. Leow, 'Bank of China's "subprime-lite" risk: some fear more write-downs are possible over lender's Alt-A securities portfolio', Wall Street Journal, (7 April 2008).
11. A CDO is an unregulated asset-back security and structured credit product, which is an important funding vehicle for fixed-income assets. It is constructed from a portfolio of fixed-income assets, which are divided by the ratings firms that assess their value into different trenches. On 30 June 2007, the balances of BOC's MBS and CDO were US$8.965 and US$0.682 billion. On 31 March 2008, the balances of BOC's MBS and Alt-A were US$4.43 billion and US$2.21 billion, respectively.
12. An Alt-A mortgage is a type of US mortgage which is riskier than 'prime' but safer than a 'sub-prime' mortgage. Its interest rate is therefore between those of prime and sub-prime house loans.
13. B. Y. Hou, 'The influence of the US sub-prime crisis and its implications to China's economy development', Journal of China University of Petroleum 24, (2008), pp. 25-29 [in Chinese].
14. We tested the correlation coefficient among the UK, the US and China house price indices. The correlation coefficients between the UK and China, the US and China, and the UK and the US were 0.59, 20.86 and 20.39, respectively. We next ran the following regression using house indices of the three countries, China =a {thorn} b1US {thorn} b2UK. We found that both b1 and b2 were highly significant at 1% with an R 2 = 0.81, which further supports the view that China's house price index is influenced by the movements of the indices of UK and US markets.
15. CHPI, designed to measure the health of the Chinese real-estate industry, is a composite index calculated based on eight categorical indices, such as real-estate investment, financing, land transfer income, and so on. These data are issued monthly by the government using March 1995 as the base point (Figure 2).
16. Personal loans include: personal residential mortgage loans, credit card loans and other loans, in which personal residential mortgage loans account for around 80% of the total personal loans.
17. 'No obvious increase of prepayment in the second quarter of 2008', Shihua Financial Report, (14 May 2008), available at: http://ihome.online.sh.cn/html/yinxingfangdai/20080514/10254.html (accessed 12 October 2008) [inChinese].
18. S. J. Yao and M. J. Chen, 'China's economic review in 2007', Policy Paper, China Policy Institute, (2008/35) School of Contemporary Chinese Studies, University of Nottingham.
19. S. J. Yao and D. Luo, 'Stock market bubble in China, incidental or inevitable', World Economy 33(5), (2009), pp. 667-691.
20. J. Anderlini, 'China says exporters could be devastated', Financial Times [Asia Edition], (16 November 2007).
21. L. Wang and X. Fan, 'The influence of the US sub-prime crisis and our strategies to cope with it', World Economy IEC no. 3, (2008), pp. 54-58 [in Chinese].
22. Basel Committee on Banking Supervision, Results of the Fifth Quantitative Impact Study (QIS 5) (BIS, June 2006).
23. C. Li and H. Lin, 'The development of the Chinese housing market and the policy implications from the US sub-prime mortgage crisis', Chinese Real-estate Finance 12, (2007), pp. 25-28 [in Chinese].
24. J. Z. Guo, 'Insights from the sub-prime loan crisis in US for banking supervision', Global View, (2007), pp. 83-85 [in Chinese].
25. National Bureau of Statistics, Country Profile, China, Mongolia, 2001-2008 (EIU: Economist Intelligence Unit).
26. D. Dollar, 'China's stimulus plan also aims to improve quality of life', China Daily, (12 November 2008), available at: http://eapblog.worldbank.org/content/chinas-stimulus-plan-also-aims-to-improve-quality-of-life (accessed 15 March 2009).
27. Batson, 'China sets big stimulus plan in bid to jump-start growth'.
28. L. Zhao and W. Lv, 'US credit crunch and mortgage lending in China', Chinese Real-estate Finance 12, (2007), pp. 41-44 [in Chinese].
29. The survey was carried out by the People's Bank of China in Beijing, Shanghai, Chongqing, Xi'an, Tianjin, Wuhan and Guangzhou.
30. China Banking Regulatory Commission, available at: http://www.cbrc.gov.cn/chinese/info/twohome/index.jsp?itemCode=9.
31. For detailed share price and market capitalization information of individual banks, see Table 5.
32. J. Anderlini and F. Guerrera, 'ICBC takes top slot for deposits', Financial Times [London, UK], (14 April 2009), p. 15.
33. S. J. Yao and M. J. Chen, 'China economy 2008: a turbulent year amid the world financial crisis', Policy Paper, China Policy Institute, (2009/47) School of Contemporary Chinese Studies, University of Nottingham.
34. S. Tucker, 'China Minsheng in pioneer US deal', Financial Times [London, UK], (9 October 2007).
35. Wang and Fan, 'The influence of the US sub-prime crisis and our strategies to cope with it'.