| Realty Industry is an important section of national economy. Its rise and fall effects national economy's directly. Realty industry is a high-input, high-risk and high-yield capital intensive industry as well. It highly reckons on financial capital, if it departs from the support of appropriate and adequate financial capital, realty industry is difficult for rapid development. So the development of realty and finance industry plays an important role for realty economy and even for the development of whole national economy.In the view of current situation of realty market, it appears a good state for supplement and demand; it is the market shape in the specific historical conditions, but not normal supply and demand situation in the condition of market, now it has appeared imbalance situation in surplus. If it is no guide and regulation in time, it is bound to exacerbate a state of disorder, blind development, consumer vacant and quantitative, structural and qualitative vacant. And it ultimately leads to consequences. In the view of construction of realty financial system, after 10 years of development, China financial system has basically taken shape in realty. But in the current operation, it still has some problems to block its rapid, persistent and healthy development. For example, insufficiency on principle parts, lack of market brokers, lack of market tools and single finance sources in realty financial system. From the perspective of risk management, investments in realty excessive rely on bank loans and it concentrates on risks sources. And there are different species in the risks of realty finance; the risks on lots of land reservation, large backlog of funds begin to be felt. The discrepancy between loan period of land reservation and cash realization from land reservation caused many unforeseen factors, which will cause tremendous risks. It is also difficult to estimate risks caused by imbalance between supplements and demands of commercial houses, and this imbalance caused"tear building"and bad loans in bank. Once there are problems on"false mortgages"of housing financing, all loans involved will become bad loans in very short time, then all risks will release together. This series of problems cause a lot of attention from our theorists and government practice sections. These need scientific answers from theories and practice.In this report, it is guided by the basic Marxist theory and analysis methods, and learning from western financial risk of realty and the rational cores of prevention theories, studying realty finance development, including its history and current status, prospects and its trend; this report will also study different modes of realty finance in different countries and the risks formation, characteristics and impact on national economic development, and will discuss development mode, risk mode, prevention system of realty finance risk and general rules of inner relationships in realty finance. On the basis of the status in China realty finance development, this report will make a reasonable evaluation on the current status of its development and its contributions in national economics development; it will make a scientific evaluation on finance risks of China realty; use for reference of which advanced experience of world realty finance, preventing risks and boosting realty economic development. Apply for a system of current target mode and framework in China realty finance; to improve abilities of preventing risks and to drive a healthy development in China realty economics.In theory, this study shows there are risks definitely in our national realty finance, because there are high risks with congenital in realty industry and it has natural link with finance. In practice, our national realty has already faced a lot of risks, which is mentioned as below. Some of the markets have risks due to overheating; and there are implied financial risks, which are caused by high liability of realty investment companies; there are moral hazards caused by"false mortgages"; there are operation risks for loans from banks; credit risks of loans from land investment; legal risks on realty loans. But these do not mean national finance and economy has been damaged by realty industry. Because realty finance is still a quality business for banks, and banks are also glad to share high-profit with investors, loans for housing are also a high-quality business. So we can not neglect the optimization role of housing loans just for the reasons of risks. At the mean time, if we want to measure the risks of realty finance, it is not only needed to compare with size of the current loans and market value of land, but also needed to compare with credit scope and market value of whole land recourses. Most of the realty in China, especially houses acquired through housing reform, do not apply for loans from banks. At present, the houses of which creditor's rights in banks are newly developed and sold in recent year. Besides, whether realty financial risks will become hazards, it depends on operation status of national economy. So one of the most conclusions in this report is that we can not say"bubble to rupture in realty"and"realty economic collapse"easily, if only a steady and healthy development of national economy and no overheating in realty industry.In accordance with the judgments of China realty financial risks, we learn prevention policies from other countries realty finance risks system, trends of financing structures, and experiences and practices of main mode of realty development; we combine market demand, current basis and inland legal policies in realty financial system, and we set up a target mode of our national realty financial development. Our target mode is to develop our REITs on the basis of contracted investment funds; this is also called Listed Property Funds (LPFs). There are many similarities between LPFs and REITs as follow: firstly, regarding to its structure and specification, the trustees of LPFs in our county manage companies and target on profit maximization for investors; independently perform its functions and achieve LPFs holders in the best interest of consumers. LPFs administrator to manage and use the funds rose to invest VIin realty, which can generate realty income, and to provide a more stable source of income in return for holders. LPFs on realty and funds are held by the fund trustees ; fund administrators and trustees will charge management fees and trustee fees respectively. Secondly, the building of the realty system in REITs should adopt Asian mode, and issue and list other regulatory provisions through special legislation on the establishment of LPFs. There are differences between LPFs and REITs: First, the structure of LPFs is decided by specific regulations, and it use the closed-end funds with a single structure; unlike the United Sates market which is driven by a variety of REITs. Second, the relationships in our LPFs between administrators, trustees and holders are trust commissioned in essence. However, the structure of the entity is not defined by"Trust Law"directly. But the structure of REITs in European and American and other Asian regions and countries is fixed directly by related legal definitions.From financial risks of the realty development and realty finance model requirements, this report shows the ideas of risks prevention systems, which adapt to the globalization of the world economy and the development trend of Chinese realty finance. First to build a new type of realty financial systems; second, it is necessary to set up a mortgage flat-network monitoring system to guard against the risks, third, build and manage the government control system to ensure the economic security of the property; fourth, we need to build realty financial risk control systems.In the basic structure of this report, it can be divided into 4 sections and total 8 chapters.Section 1, Summary of Realty Financial Risks in Theories (Chapter 1-Chapter2): interpretation of realty finance and risks in theory. Thought the review of realty finance and risks in theory, analyze the operating mechanism of the development of realty finance, and study the inter-relationships between national economies, realty economy, realty finance and realty finance risks; explore the formation and development of realty financing micro-mechanism and macro-risk mechanism, and provide a theoretical basis for establishment of our realty financial and improving the system of risk prevention.It is thought in this report; risks are changes in the development of things caused by uncertainty. When changes are not conducive to the normal development of things, beneficiaries have to bear the losses; we call those risks of losing. From the general sense, the financing channels for single, asymmetric information, collateral risk, speculative behavior, banks and other illegal operations, all these can be the internal reasons for realty financial risks. However, state policies and regulations change, international economic turbulence caused by exchange rate fluctuations, changes in domestic interest rates and other financial risks, all these can be the external factors for realty financial risks. Then reasonable realty financial development and improving risk control system are the basic ways to avoid internal risks and to prevent external influences. Section 2, Summary of the Realty Finance Development Abroad (Chapter 3, Chapter 6): study the mode and prevention measures of world realty finance development. Compare and study the different types of realty finance development model in different developed and developing countries; clarify the similarities and differences between model and mechanism of its operations; analyze the general rules governing the development of realty financing; support further theoretical policy preparations.In this report, it has been 200 years of development of realty finance in developed countries, they are rich in successful experiences: They have set up a complete system of financial institutions and the development is based on the market mechanism; a dominant force in the realty finance market is all the government financial instructions, housing loans and consumer loans are separated; Professional realty loans of financial institutions is in a dominant position in the housing market. The basic form of housing loans is mortgage loans, which its forms are more flexible and completed in housing loans market. Realty finance innovation grows rapidly, and the government also provides positive supports for its development and so on. Compared with developed countries', the development of housing loans in developing countries is far below the economic level of developed countries, and they have not established a housing finance system yet, which is complete and be tied closely with each other. They have not established a completed mortgage loan market, and the form of mortgage loan is single. And also, they focus on re-financing of housing construction, but ignore re-financing of housing consumer; lack of innovations; the government is also less of support in realty finance. This study concluded that China is a backward country in economy; the realty finance development level is very low and it faces with the arduous task of the rapid development. It is very important for China to learn from the experience of developed countries of high level economic development in realty financing, and to learn from the lessons of low level of financial development in developing countries; so that a mode that will fit China will be formed.This report concludes the mechanism of financial risks. It is carried out by the study of world realty financial risks and analysis against financial risks. The mechanism can be concluded as follows: banks involved in the excessive, relaxed financial environment, the week control policies, international capital flows and other factors affecting the outcome of the interaction. Analyze the international framework for the formation of the realty bubble and this has been an effective policy experience, which is a stable exchange rate, good use of interest tools, strict control of bank loans and the management measures etc.Section 3, Current Status and Risk Judgment in China Realty Finance Development (Chapter 4-Chapter 5): Analyze the current status of China realty finance development, and make judgment of its risks. Analyze the current situation and problems and focus on historical and reality study of its mode, and make a scientific judgment on risks in current China realty finance, such as whether it has risks, how about its risks and so on. That will provide actual evidence for our national realty financial mode and the establishment of risk prevention system.In this report, realty financial development has experienced four periods of start, shrinking stagnation, comeback development and adjustment, and now it has been to a steady period of development. Especially from 2004, to be adapt to current realty market situation, realty development construction began to shrink, the requirement and demand are improved, residential structural problems highlighted, investment housing demand is growing faster, foreign funds enter the hot realty market in the region, and no development for land which has been sold. There are following characteristics in China realty financial market: investment funds dropped in place, a larger increase in realty loans, slow increase in developer loans, personal housing loans concentrated in a handful of major cities and hot spots, and rapid growth in housing loans policy. All these cause a sharp rise in prices, strong demands, single channel concentration on risks, lack of financial market system, in-effective of market regulators, and problems such as control mechanisms. Regional financial risks in China's realty signs, such as little risk of personal realty loans, development loans released risks of individual banks and risks on government land reservation. Conclusion of this study is: realty financial risks do exist, but not"hijacked"the country's finance and economy, and whether it will become crisis, it will depend on the national economy as a whole.Section 4, Target Mode of China Realty financial development and structures of risks prevention system (Chapter 7-Chapter 8): to discuss the target mode of China realty financial development and the structures of risks prevention system. Based on the development of the realty finance in China, and the analysis of its current situation, problems and risks, learn from the advanced development mode, and guard against and defuse financial risks, explore and establish the goal of the development of China's realty finance, and improve a mechanism and systems to prevent financial risks. The event aims to promote the healthy development of China's realty economy, thereby stimulate rapid development of the national economy.This report thinks that REITs (Real Estate Investment Trusts) is the main mode of world realty financial development. This mode is to collect more funds through a document issued by a qualified majority of investors, and to be managed by investment institutions. Comprehensive investment proceeds will be distributed pro rate to a trust fund for investors. In China, the investment trust funds are quite feasible. First, there are successful listings of REITs in foreign exchange of experience for reference. Secondly, there are more than 50 listed companies in the realty business and regulatory experience to be shared. REITs provide reference for the design of the products. Third, REITs listed processes and business rules which are basically the same as the ordinary listed companies, the implementation costs are lower. Fourth, it is currently engaged in more than 29,000 enterprises in realty development. These companies can become a main resource of REITs. Since REITs is hard to break restrictions in China's current legal system for the development of corporate and trust-based, this report advocate the development of China REITs produces through the model of contractual investment funds, which is also called LPFs (Listed Property Funds). It can provide banks for realty finance; help reduce over-reliance on bank loans due to the systemic risk.From the realty and financial development requirements of the target model, this report shows the development trend and risks prevention system, which adapt to the globalization of the world economy. First, in line with international experience and China's national conditions, set up new financial systems in realty, including 10 systems: legal system, financial institutions supervision system, fund-raising system, guarantee or insurance system, property management system, the government subsidy system. Second, change the traditional bank mortgage which guard against the risk control mechanism (vertical control system) to a new type of control mechanisms which prevent mortgage bank risks (flat network monitor and control system). Third, ensure the economic security of government property and management system, including possession of the target system and management of the system tools. Forth, set up the realty financial risks control system: paying attention to realty market trend, preventing risks, deepening reform of the financial system, innovating financial services, and developing the hedging tools, to establish a sound risk control mechanism, to strictly control the operational risks, speeding up the legal process, guard against the external risks of realty finance business.This study is to the basic Marxist theory and analysis as a guide, to the practice as a basis for the development of China realty finance, to regard realty finance development mode and its practice in representative world countries as comparison and reference, to take the methods of combinations of theoretical and empirical analysis, comparison and combination of longitudinal, qualitative analysis and quantitative analysis, and combination of past and future. It use he method of empirical analysis, compare and study with the realty finance development in developed and developing countries, analyze its specific and general mode in development, and reveal the general rules of its development. Meanwhile, it is transition from a historical analysis to reality gradually, transition of analysis scope from developed countries to developing countries, and transition to China realty finance development ultimately. On the macro level, understand the changes in the general law, and then into microscopic analysis, and analyze the uniqueness of certain parts of the countries. We strive to make the study of theoretical research and high academic value, and also this study can be used as actual operation.This study makes a scientific judgment with China realty financial risks, and confirms its target model, and establishes its structure of risks preventing system, tries to prevent financial risks, improves a healthy development in China realty finance, pulls the realty economy, accelerates urbanization process and achieves sustained rapid and sound economic development. All these above have theoretical and realistic significations.But as we know, it is difficult to have any progress in theory. This report has overcome the obstacles, such as weakness of realty financing research, lag of data, and uniformity of statistical standards and so on. This report also tries to have breakthroughs and innovation on the research of risks.There are 4 aspects of innovations in this report; they can be demonstrated in the following:Firstly, this report tries to make a new summary of realty financial risks theory. It sorts out the interaction relationships between realty finance and realty economic development through the review of realty finance and its risks. It analyzes the basic type and its formation of realty financial risks, and then sum up macroeconomic and microeconomic mechanisms of the formation of the risks. It prepares a theoretic support to the judgment and prevention of realty financial risks.Secondly, try to make a new conclusion on the target model of China realty finance development. This paper analyzes the history of the development of realty finance. Through the aspect of different counties, it provides three types of realty financial development. These are the United States model, the German model, Singapore and South Korea model. Make a summary of the general development rules of realty finance. This has reference value for theoretical research, and provides practice experience abroad.Thirdly, try to make a scientific judgment on China current realty financial risks. Use the theory of western realty finance and risks; analyze the history and current status of China realty finance development. Affirmation of the realty finance makes a significant contribution to the development of national economy. Point out the major problems in realty finance development and its reasons. Based on the realty and financial risks, make a scientific judgment. The paper points out that China's realty finance obviously vulnerability. There are huge risks in the historical economy of the property, and there are enormous financial bubbles in current realty. If piled up the obvious potential risks, serious crisis will happened. According to above judgment, it has certain financial significant guidance for a clear understanding of the reality of China realty development. Precede to the structure of realty financial risks prevention systems and provide a theoretical basis.Fourthly, try to propose a new structure of China realty finance risks prevention system. Based on scientific judgments of current realty financial risks, from the requirements of target model in the development of China realty finance, this report propose a risk prevention system innovatory, which adapt to the development trend of economic globalization and development of China realty finance. This system focuses on its internal logic and systematic factors, and presents the principle of interaction between urban and rural areas, and the principle of interactive industry. It also reflects the requirements of national economy development. There are innovations in theory, and there are realistically feasibilities in practice.
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