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.

住房所有权的抵押和证券化以及资本对廉租房的渗透，这是住房金融化方面的文献最关注的问题。但事实上，住房金融化的形式各有不同。在中国，住房的商品化和私有化提高了人们的住房拥有率。住房金融化的结果之一，就是促使业主的自有住房转变为家庭财富的金融资产。尽管中国的住房抵押贷款水平相对较低，但抵押贷款的绝对数量和所占国内生产总值的比例都在上升。住房价格上涨也明显增加了住房消费融资渠道。本文对这些渠道进行了分析，并认为住房金融化是中国整体发展模式的重要组成部分，进一步论证了中国住房金融化的根源不是住房抵押贷款证券化，而是在国家控制的金融环境下，将资助房屋变成金融化资产，以此推动中国经济实现更大范围的金融化。

Aunque la literatura sobre financiamiento de vivienda dedica mucha atención a la propiedad de vivienda familiar de compra hipotecaria o mediante garantía de aseguradora, y a la penetración del capital en la vivienda arrendada con subsidio, las formas de financiamiento son variadas. En China, la comodificación y privatización de la vivienda ha apuntalado la expansión de la vivienda en propiedad. Uno de los resultados del financiamiento de vivienda es la transformación de la vivienda ocupada por el propietario en un activo de finanzas para la riqueza del hogar. A pesar del nivel relativamente bajo del préstamo bajo hipoteca residencial en China, el volumen hipotecario y la proporción del producto interno bruto que representan, ahora están creciendo. La valoración de la vivienda ha impulsado un significativo incremento en el consumo financiero para vivienda a través de múltiples canales. Este artículo examina estos canales y sugiere que el financiamiento de vivienda en China es una parte crítica de modelo general de desarrollo del país. También se sostiene que la raíz del financiamiento de vivienda en China no es el aseguramiento de las hipotecas sino la creación de vivienda ocupada por el propietario a manera de activo financiado para impulsar el más amplio financiamiento de la economía china, dentro del contexto del entorno financiero controlado por el estado.

Key Words:

• China
• financialization
• homeownership
• housing
• land finance

关键词:

• 中国
• 金融化
• 房屋所有权
• 住房
• 土地融资

Palabras clave:

• China
• financiamiento
• financiación de la tierra
• propiedad de vivienda familiar
• vivienda

Acknowledgment

We thank Yi Feng for research assistance.

Notes

1 The full text of Xi Jinping’s report at the Nineteenth Chinese Communist Party National Congress is available at http://www.xinhuanet.com/english/special/19cpcnc/index.htm (Accessed November 3, 2017).

2 The nationwide mortgage restriction policy was first enacted as a component in the China State Council’s policy package to cool down the property market on 10 January 2010. All financial institutions were instructed to increase the minimum down payment ratio of mortgages from 30 percent to 40 percent for applicants who had owned a home. This policy became stronger in the China State Council’s new policy package to cool down the property market that was announced on 29 September 2010. After this date, the minimum down payment ratio was further lifted from 40 percent to 50 percent and the mortgage interest rate was to be set at no less than 1.1 times the benchmark loan rate to applicants who had owned a home. Meanwhile, the state council ordered all commercial banks to cease issuing mortgages to all applicants who had already borrowed two home mortgages and to cease issuing mortgages to all nonlocal residents without at least one year’s local employment or tax payment record and to set the minimum down payment ratio to no less than 30 percent for all borrowers. The mortgage restriction policy was much relaxed by the authorities on 1 October 2014, enabling those who had paid back mortgages to be treated equally, with preferential policy as first-time home buyers. In the new round of property market regulation that swept across all major cities in the spring of 2017, there is now no nationwide policy and municipal governments are given the discretion to design and enact their own cooling-down policy packages, including mortgage restriction policies. Most major cities, though, have enacted very stringent mortgage restriction policies. For example, the minimum down payment ratio of a mortgage is 35 percent for first-time home buyers and 50 percent for second-time home buyers if the home to be mortgaged is common housing and 70 percent if the home to be mortgaged is luxury housing.

3 See the SOHU News (accessed August 27, 2018) at https://www.sohu.com/a/250296354_100231706.

4 According to National Bureau of Statistics of China (NBSC), the total unsold inventory of commodity property hit a historical high of 739 million m² (including 466 million m² of residential housing) in January 2016. Meanwhile, property under construction at the end of 2015 comprised 7.36 billion m², also a record high. Because the annual volume of sales in China was around 1.0 to 1.2 billion m² during 2014–2015, this implies that the market would take roughly six to seven years to absorb this excess inventory. Thus, this oversupply emerged as a key economic issue toward the end of 2015. At the central economic working conference in December 2015, the destocking of real estate was included among government’s five major tasks for 2016. A series of policies to stimulate the real estate market and promote the destocking of real estate were then enacted, such as reducing the down payment proportion of housing loans and reducing housing transaction taxes and fees.

Additional information

Funding

We acknowledge the joint funding support of the project titled “The Financialization of Urban Development and Associated Financial Risks in China” from the UK Economic and Social Research Council (ESRC) (ES/P003435/1) and Natural Science Foundation of China (NSFC) (NSF71661137004).

Notes on contributors

Fulong Wu

FULONG WU is Bartlett Professor of Planning at University College London, London WC1H 0NN, UK. E-mail: [email protected]. His research interests include urban development in China and its social and sustainable challenges.

Jie Chen

JIE CHEN is Professor at Shanghai Jiao Tong University, Shanghai 200030, China. E-mail: [email protected]. His research interests focus on China’s housing development.

Fenghua Pan

FENGHUA PAN is an Associate Professor at Beijing Normal University, Beijing 100875, China. E-mail: [email protected]. He was Research Associate of this ESRC project at University College London, and his research interests are Chinese financial geography.

Nick Gallent

NICK GALLENT is Professor of Housing and Planning at University College London, London WC1H 0NN, UK. E-mail: [email protected]. His research focuses on UK planning policy as it pertains to housing delivery and as it affects rural communities.

Fangzhu Zhang

FANGZHU ZHANG is Associate Professor at University College London, London WC1H 0NN, UK. E-mail: [email protected]. Her research interests include China’s innovation and sustainable development.