U.s. Subprime Mortgage Crisis On China's Economy

Subprime crisis is also called subprime mortgage crisis or subprime lending crisis. The subprime crisis is an ongoing financial crisis happened in the United States triggered by numerous Subprime mortgage institutions bankruptcy. And it cause investment funds forced to closure, the stock market violent shock and will sweep global economy.April 2007, with New Century Financial Corporation application bankruptcy protection for starting point, the financial risk of the subprime mortgage crisis is exposed little by little.Later the risk rapidly diffusion to products of securities based on subprime mortgage. June 2007,the information that hedge fund of the fifth great investment bank of America Bear Stearns Companies investment subprime mortgage suffer loss and will face with bankruptcy cause the unrest of financial market in the global range. A large number of Home Mortgage Loan companies have been on the verge of bankruptcy. Alot of hedge funds are forced to clean an abacus.Many commercial banks and safety mechanisms also suffer heavy losses. With the global stock markets falling, credit risk caused by subprime lending finally become a global financial crisis.China in the globalization process can not avoide its influence. Subprime crisis is still going on, and up to now the influence of subprime crisis on Chinese economic development is not completely expose.This paper make a qualitative analysis on American subprime crisis.First, it introduces the economic background of subprime crisis, and investigated the caused of subprime crisis from the perspectives of history. Secondly, it analyze the evolution and development of subprime lending business. The causes of subprime crisis is presented in this paper with a detailed recount of subprime lending business vulnerability. Based on this analysis, the influence of subprime crisis on Chinese economy is exposed. This article divides the infuence of subprime crisis on Chinese economy into directly influence and indirect influence. The directly influence include the direct losses of domestic financial mechanisms and the flow change of hot money caused by subprime crisis. Because of the flow change of hot money, Chinese domestic stock market and real estate market follow the fluctuating of American economy. Because of the decrease of American consumption demand caused by subprime crisis, heavily depending on export China's foreign trade and domestic investment will be surely impacted. This kind of influence through a chain reaction affects the employment situation in China and China's domestic consumption.By analyzing the causes of subprime crisis and the infuence of subprime crisis on Chinese economy, finally this paper conclude the inspiration to China. We should make a long-term and sound monetary policy, strengthen bank management, perfect financial supervision. By the implementation of these measures we can avoide appear similar phenomenon in American subprime crisis.