| Without doubt, there is highly relevance between the real estate industry and the financial system. On the one hand, the real estate industry and the financial system sustain each other. On the other hand, they further risk. In China, banks are the main means of financing for real estate market. Before 2007, scholars historically have tended to think of systemic risk primarily in terms of financial institutions such as banks and have reached a common view that the less risky financial structure should be made to resemble the financial structure of the US economy and development of financial markets so that the reliance on the banking system is reduced, is regarded as an important means to reduce risk with real estate finance. In 2007, subprime crisis occurred, struck the economy, and cause strong repercussions around the world. The conventional view has been doubted. Certainly, we can't give up development of financial markets for this crisis, but the particular features of risk in US financial structure is undoubted to deserve an in-depth research. Unfortunately, there has been relatively little research. Meanwhile, the most particular feature of Chinese real estate market is involved with all kinds of participators such as central government, local governments, banks, housing developers and housing buyers(buyers for consuming and buyers for investment), and their relationship is complicated. The conventional researches are always based on the formation mechanism of banking systemic risk, which emphasizes its technologic analyses on the financial system. There are too little explorations on the formation mechanism in an interest group perspective.Based on these backgrounds, this dissertation tries to find the inwardness of the formation mechanism of risk with real estate finance, and make that clear both in US and China. Two key issues are proposed in this paper, and from these two issues'derivation we outlined the whole research framework. The first problem is that what are the new particular features of risk in US financial structure? And the second problem is that how about the formation mechanism of risk with real estate finance of China? The purpose of this paper is to see about whether marketization is a good means for reducing the risk of real estate finance of China both in the technical and the Chinese unique situation senses. In a word, the author puts the stress on the formation mechanism of risk with real estate finance in China.This dissertation includes five chapters, which can be divided into three sections on the whole except the introduction. Section 1 mainly states the theoretical basis of risk with real estate finance and derives theoretically general framework of the formation mechanism of risk with real estate finance to provide facilities for the whole. This section mainly includes Chapter 2. Section 2 answers the two main problems:the new risk features in US real estate finance and the formation mechanism of risk with real estate finance in China This section mainly includes chapter 3 and chapter 4 and it's the core of this paper. Section 3 proposes improving channels, including the common principle for both US and China, the solution mode of China and conducts a preliminary exploration on financial risk governance framework of China. This section mainly includes chapter 5.Specific contents and points are as follows:Chapter 1 is the introduction. It gives a briefing on the significance of topics and research background, the basic ideas and chapter structure, methodology and the basic assumptions used, and the innovations of this paper.Chapter 2 is the analytic framework of the formation mechanism of risk with real estate finance, which mainly analyses the basic conceptions and historical development of formation mechanism of risk with real estate finance. Three parts are completed in this chapter. First, It points out that the formation mechanism of risk with real estate finance can be unified in the same framework. It points out that soul of formation mechanism of risk with real estate finance is whether there is correct valuation of risk by financial system and the key factors are the information (incentive) issues, and liquidity provision. On the one hand, information incomplete and information asymmetry will incur the overvaluation of real estate assets (the undervaluation of risk) from financial system (institution or market), then the excess liquidity provision, and then the real estate bubble. On the other hand, real estate financial crises depend on the relationship between property price and liquidity provision from financial system. Abundant liquidity provision means risk sharing and insurance at any moment. There is no discount of assets to incur crisis. Second, introduce a new view to research the formation mechanism of risk with real estate finance, which can clap the core virtues of aforesaid framework. In conventional point, market is better than government by information and incentive. Securitization not only brings along more participators, but also set up mechanism for supervising and balance. All the participators recognize and control the risk perfectly, and form the correct valuation of risk. Subprime crisis reflects that there are also limitations to solve information problem in securitized finance, then incur misevaluation of real estate assets, and then incur crisis involved with the effect of liquidity provision. This gives the research view for subprime crisis, from which of the information and liquidity provision to get the new features of securitized finance. Third, on the basis of particular situation in China, build an analytic framework of the formation mechanism of risk with real estate finance in China, and introduce the perspective. The potential logic of the aforesaid framework doesn't tallies with China's situation, which is that the misevaluation of risk by financial system arise speculation, On the one hand, interest rates are not likely to move to their market-clearing levels in funds market, the action and function of financial system is limited. On the other hand, the real estate bubble in China is arisen for the unbalances of the demand and the supply, but not speculation. So the heart of the analytical framework real estate industry should be involved with interest group but not finance.Chapter 3 is the marktization practice overseas-survey of subprime crisis, which analyses the new features of formation mechanism of risk with real estate finance in market-oriented countries from information economy and liquidity views. First, this chapter provides an overview of the subprime mortgage securitization process and the seven key informational frictions involved with the mortgagor, the originator, the arranger, the third-parties, the servicer, the asset manager and investor, discussing the ways that market participants work to minimize these frictions and speculate on how this process broke down, with emphasis on the important part of the rating process. It points out that the root of subprime crisis is information issues (adverse selection, moral hazard, and agency problem). The participators can't recognize and control risk perfectly, and have not formed the correct valuation of risk. Second, it analyses three new features in securitized real estate finance significantly:(1) Market participants are more dependent on market liquidity. Alongside the traditional bank-mediated liquidity, there is a second and growing component intermediaries are willing to extend to each other. (2) There is a close interaction between liquidity and valuation; new contagion channels have appeared. (3) Uncertainty has a bigger impact than before on market and funding liquidity. Finally, it analyses governance briefly, pointing that this crisis is undoubted to be an opportunity to improve the traditional ideas of framework of government policy and financial supervision. The authorities should balance the price stability and asset price stability considerately, with emphasis on financial stability. Banking regulation needs to be designed to solve market failures rather than imposed piecemeal as a reaction to crises.Chapter 4 is thoughts in Chinese situation:interest group and the formation mechanism of risk with real estate finance in China. This chapter is the most important part of this dissertation. It arms to make clear the formation mechanism of risk with real estate finance of China from the view of multi-participants and multi-markets focused on the commodity houses market, including the primary land market, funds market and supervisor. There are mainly two parts in this chapter. Part 1 analyses-the situation of real estate market in China, and points out that the most particular feature is the unbalance among the different participants, which made the heart of the framework of risk with real estate finance is not finance but real estate industry. Part 2 is the main body of this chapter, seeking for the formation mechanism of risk with real estate finance in Chinese particular situation. There are three steps to analysis the formation mechanism based on the features of real estate market and pricing mechanism. First, it defines the monopolization of real estate market,and make clear that the pricing mechanism is cost added with monopoly profit, pointing out that the analytical issues of real estate bubble should be cost in up-markets and monopoly profit in main market. Second, it analyses the relationship among land cost, funds cost, and housing price in up-markets and main market. Third, it analyses the strengthening of seller-biased market. In China, three. factors make the real estate market an imperfect market, which are the same benefit among developers, local governments and banks, the real estate shortage involved with land shortage, the formation of effective demand (sustained by the income increasing and bank mortgage loan provision). The suppliers can transfer the cost to under-market participants easily, and gain the monopoly profit. The unbalance of the demand and the supply can incur real estate bubble easily. Then, for in-depth analysis of the mechanism, it builds an essential economic model from the two sides of the supply and the demand, to introduce the constraint conditions arisen by interest group to help understand. After proved that in theory, it quantifies the seller's market extent to prove the theoretical analysis. Finally, it analyses the cause of bubble burst and contagion channels.Chapter 5 is the concluding remarks and perspective, which provides the whole frame of reference and thoughts on ways to reduce the risk. There are mainly two parts in this chapter. Part 1 gives the two principles to govern the risk in China:market self-regulation and interest balancing based on the analysis and comparison on the mechanisms in U.S. and in China. On the one hand, the same principle to govern the risk in both countries is to perfect market incentive and restraint mechanism. On the other hand, there are difference in development stage and background in different countries. The economy is a market-collocation economy in U.S. This crisis just reveals the market failure and channels to perfect. In China, the transition economy is a compound economy, and it is a transition stage between market system and centralization system. The formation mechanism in China in involved with interest group, the governance is also involved with interest group. Marketization is not only to define and introduce instruments, but also create and re-build the relationship of interest group. Part 2 presents channels to perfect the commodity houses market, primary land market, and funds market respectively. First, the problem in the commodity houses market is the dislocation of market, and the vacancy of government. The solution way is to resume the housing guarantee system by government to balance market force as well as to perfect an efficient and healthy commodity houses market. Second, the situation depends on the environmental development, including incentive and restraint mechanism, the core of reform is not destroy interest group, but develop market step by step to help balance. Finally, introduces exploration to marketization in funds market from the finance function and interest group perspective. Develop market is also a process to re-build the relationship of interest group. An efficient real estate finance system should do the six basic functions well, but not just change of scale or form, with the establishment of the institution environment and the whole network.The main innovations of this dissertation are as follows:First, this dissertation investigates the particular feature of real estate market in China based on the new political economy perspective. It points out that government and market both function in resource allocation. The risk with real estate finance is interest unbalance in special environment of China. Marketization is not just building of exterior rules, but involved with the re-building, running-in, and formation of interior rules. The arm of introducing constraint mechanism (exterior rules) in market is to balance the interest group, form some interior rule to make interest group work of itself and the market efficient.Second, this dissertation, which attempts to clap at the core virtues of transition phenomenon, applies principles of economics to build equilibrium model, and applies statistics techniques to prove the theory. It reveals that the formation of risk with real estate finance (the formation of real estate bubble) in China is determined by the unbalance of the supply and the demand in the markets based on the pricing mechanism in monopoly market in three steps.Third, this dissertation puts forward how to reduce the risk in whole and in different markets based on the analyses in U.S. and in China. On the one hand, the essential solution way is the basic impetuses made by market. On the other hand, when we explore the solution way, we must attach importance to think the special "constraint conditions" in China. The author emphasizes that the reform in funds market is not change of scales or forms, and we can't understand that just in financial perspective. It is also involved with social relationship re-building.The development of financial modes should attempt to make the financial functions work well, and change the social structure and relationship.The limitations and follow-up study of this dissertation are as follows:First, the optimal path to reduce risk has not been studied in-depth in this dissertation. Finally, because of the lack of data, some analysis has not been comprehensive. The above limitations and shortcomings of this dissertation need to perfect.
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