Research On Financial Innovation And Risks Prevention Of Real Estate In China

Real estate financial innovation originates from the financial deepening and financial innovation theory. Impacted by the theory, the real estate in some countries, especially some developed countries developed rapidly. However, the Asian financial crisis in 1997, especially the international financial crises come from the US subprime lending in 2007, reflect people on the financial innovation theory. Some scholars considered the real estate financial innovation as an important factor to trigger crises, there is a causal relationship between real estate financial innovation and financial risks. Some domestic scholars also changed their attitude from the advocation of real estate financial innovation to the restriction of its development, which resulted in the gradually wilting of real estate finance innovation practice, such as housing mortgage loan securitization. We think that the origin of the US subprime lending was caused by multiple complex factors, which can not be simply blamed on the financial innovation. If it is related to financial innovation, we can only regard it as the result of excessive financial innovation. There is no reason to simply stop or slow down the real estate financial innovation. The impact of the real estate financial innovation on the financial risks is complex and uncertain, as well as different on various economies. It is a subject worthy of further study. Therefore, it is necessary to clarify the origin of the real estate financial innovation theory, grasp the prominent characteristics of the real estate finance innovation, and make theoretical analysis and empirical verification to have the dialectical understanding of the relation between the real estate financial innovation and financial risks, to avoid the financial risks and to push forwards orderly the real estate financial innovation.Based on the review of theories on real estate financial innovation and financial risks, and domestic and foreign research literature, the paper defined the connotation of real estate financial innovation and financial risks. By constructing a partial equilibrium model, it proved that there is complicated nonlinear relation between the real estate financial innovation and financial risks, and the orderly and appropriate promotion of real estate financial innovation can disperse the financial risks and reduce systematic risks in the overall financial system; In addition, the excessive real estate financial innovation separated from real economy and beyond the carrying capacity of financial market, will make the flow of excessive amount of money to the real estate market, which will stimulate new systematic risks.Then the paper deeply analyzed the status of China’s real estate financial innovation and financial risks, and summarized the outstanding features of the real estate financial innovation and financial risks as follows: The long-term steady improvement and short-term volatility of the real estate financial innovation will co-exist; Real estate financial innovation deeply depend on business innovation of commercial bank mortgage, which is in the transitional stage from financial repression to financial deepening; The real estate financial risks will run through the whole process of China’s industrialization and urbanization, while the possibility of evolving from a hint of financial risk to the global risks will increase occasionally; There are centrality, concealment and potential in the risks of real estate finance supported by traditional financial organizations and informal finance; The stage of the real estate financial innovation decides that the agglomeration of real estate financial risks originate from financial constraints rather than financial innovation.The paper made an empirical research on the logical relationship between the financial innovation and financial risks of the real estate in China by the co-integration model analysis and systematic GMM model analysis based on the panel data collected from the 16 listed banks. The results showed that the appropriate financial innovation of the real estate in China, transiting from financial repression to financial deepening, is helpful to disperse and control the risks of real estate finance that highly centralized in commercial banks, and to reduce the possibility of systemically financial risks.Finally, referenced from the experiences of foreign real estate financial innovation and risks prevention, the paper suggests to promote moderately the real estate financial innovation, and disperse gradually the over- concentrated real estate financial risks based on the facts of China’s real estate financial innovation; On the other hand, it suggests to strengthen early warning and control of financial risks, to prevent the systematic financial risks brought by the excessive real estate financial innovation.