The Vulnerability In China's Real Estate Market Under The Condition Of Open Economy

It is a consensus that the open economy is an inevitable choice for the development of our socialist market economy.In the crucial stage on where the economic development has been getting into “New Normal”,in order to promote national economy the sustained and stable growth,it's necessary to construct new open economic system,achieve the deeper integration with the global economy and the higher level of open economy.However,the ever-expanding economy and financial liberalization have also increased the vulnerability of the domestic economy.Since the beginning of 21 st century,the volatility of international financial markets and complexity of international economic environment has increased.In special,there exist significantly upgrading volatility and vulnerability in the real estate market of China after the US subprime mortgage crisis of 2008.In the condition of open economy,the real estate market has experienced a rapid boom,yet the financial and economic vulnerabilities in this market have highlighted during the same time.On the one hand,the domestic real estate market become much integrated with international stock markets;on the other hand,large-scale short-term capital flows have exacerbated real estate financial risks,due to the differentiation of short-term interest rates and exchange rate fluctuations in developed markets.In the context of deepening inter-regional economic openness in China,the vulnerability of regional real estate economy has placed constraints on its healthy and stable development.In the basis of combing the theory about vulnerabilities of real estate market,this paper tries to resolve the transmission mechanism of the real estate market vulnerability under the background of economic globalization,and sort out the mechanism of exchange rate and interest rate marketization on real estate financial risks from the perspective of financial openness.Moreover,it studies the factors of economic vulnerability of the real estate markets in terms of its structure,price,sustainability and fairness in the inter-regional open economy.In order to exam the economic vuneralbility,the author constructs a multi-estimating index system,and then makes quantitative assessments of economic vulnerabilities among regional real estate markets by using Entropy Method.For further test the financial vulnerability of China's real estate market under the condition of open economy,this paper tests the financial contagion of real estate market with respect to international financial turmoil utilizing the DCC-MGARCH model.At last,it investigates the influences of financial marketization on financial risk of China's real estate markets by using the MS-VAR model.The results show that the real estate economy as a whole is pretty vulnerable.It is mainly manifested in the high housing price-to-rent ratio and the undersupply of social housing.Yet real estate economy still has a huge space for development in China.The results declare that the vulnerability of real estate economy is higher in the eastern provinces than that in the mid and west.Except for the common reasons in all regions,the vulnerability of real estate economy in eastern is displayed particularly in unreasonable housing price-to-income ratio and that an apartment becomes unaffordable for general family.Moreover,there is little difference in the development of real estate economy among the mid and western provinces.Low per capita GDP and structural imbalance between housing supply and demand also contribute to the vulnerability of real estate economy in those areas as well.It's also uncovered that there is a significant positive time-varying correlation between real estate stock returns in Chinese mainland and which in Chinese Hong Kon,Europe,Asia Pacific,Emerging markets and the United States.Those correlations are also obviously different as well as much stronger during the globalization.It's necessary to point out that fluctuation in United States stock market has contagious effect on China's real estate market during the American subprime mortgage crisis.However,Europe's escalating debt crisis has limited impact on China's real estate stock market.It's clear that exchange rate fluctuation has a powerful influence on China's real estate financial risk.No matter the RMB is expected to rise or fall,the present RMB appreciation would increase the financial risk during real estate development.Nevertheless,the rate of RMB to USD moves opposite to the financial risk of housing mortgage when it is expected depreciated.The inflow of short-term international capital would uplift real-estate financial risk,while the raise of money supply could decrease the financial risk of real estate development and increase that of housing mortgage.Moreover,when interest rate is low,a rise of it could effectively ease real-estate financial risk.Conversely,the sustained growth of it would inflate this risk.The impact of rising interest rates on real estate financial risk is relatively limited in short-term international capital channels.Only when the interest rate is low,it can work well by raising money supply and interest rate.Furthermore,when there is an uptick in property prices,the financial risk of real estate development could decline and that of housing mortgage would ascend.Similarly,the influence of accelerating growing GDP on financial risk of real estate development is also different from that on the financial risk of housing mortgage.