Key words: financial institution, liquidity, asset price, financial market, exchange rate system, real estate market, overseas investment, monetary policy.

In 2008, the subprime mortgage crisis in the United States (hereinafter referred to as the subprime mortgage crisis) set off a second wave of frenzy: Citigroup and Merrill Lynch successively announced that their losses in the fourth quarter of 2007 both exceeded $9.8 billion, and UBS Group AG even broke the historical record of11400 million. Due to the continuous expansion of the affected areas, the global financial market once again experienced violent shocks, which quickly spread to China in the first place. Now it seems that the negative impact of the subprime mortgage crisis on China's economy may exceed the original expectations.

First, the background and causes of the US subprime mortgage crisis

Sub-prime housing loans refer to loans provided by some lending institutions to mortgage borrowers with poor credit and low income. In the early 1980s, the United States formed an economic and legal environment conducive to the development of subprime housing loans, which enhanced the motivation of lending institutions to issue mortgage loans. 1998 from 2006 to 2006, the proportion of subprime loans in total loans in the United States rose sharply, reaching the level of 15% in the fourth quarter of 2006. The expansion of the sub-prime loan scale, irrational prosperity of the real estate market and the upsurge of enthusiasm for derivatives investment are simultaneous and internally related, which not only caused prosperity, but also gave birth to the current sub-prime loan crisis. As the Federal Reserve has continuously raised interest rates since 2004, the sharp rise in interest rates has increased the repayment burden of buyers. At the same time, the US housing market has also begun to cool down sharply. Many lenders can't repay their loans on time, which leads to the subprime crisis, such as the loss or bankruptcy of subprime lending institutions, the forced closure of investment funds and the violent shock of the stock market.

There are five reasons for the crisis in the world financial market caused by the subprime mortgage in the United States: First, the changes in the interest rate policy of the Federal Reserve and the loan interest rate. Before June 2004, the Federal Reserve cut interest rates 12 times, which led to continuous financial innovation. The relaxed financial environment makes the approval procedure of subprime loans more relaxed, and its supervision is also seriously neglected. Since then, out of concern about inflation, the Fed has continuously raised interest rates by 65,438+07 times. Correspondingly, the interest rate of subprime loans has gradually increased, resulting in the inability of low-income people to pay the house payment, and the real estate bubble has been bursting. Second, the growth rate of house prices in the United States has slowed down or even generally dropped sharply, leading to an increase in the sub-prime loans overdue rate. Third, the procedures and standards of subprime loans are relatively loose or even low, lacking laws and supervision. Fourth, debt-backed bonds and other derivatives based on housing loans have defects in structural design and liquidity. Fifth, hedge funds, banks and other institutions use high leverage to raise funds in debt-backed bonds and other transactions, which magnifies the risks in the financial market and causes a series of chain reactions to fluctuations in house prices and interest rates, thus causing fluctuations in the overall market and turning it into a global crisis.

From a deeper perspective, this crisis is essentially the result of long-term contradictions within the international financial market system. Since the 1990s, financial liberalization and the proliferation of various financial innovations have made the global financial market system excessively use financial leverage for risk management and speculative trading. The subprime mortgage crisis is only the fuse of the current financial market system crisis. The essence of the crisis is a credit crisis, not a liquidity crisis, and its impact on the world economy will be far-reaching and lasting.

Second, the negative impact of the US subprime mortgage crisis on China.

(1) It is difficult to accurately estimate the losses caused to financial institutions in China.

At present, the total investment of China banks in subprime bonds and their derivatives is still a mystery, and there is no exact data. More reliable figures should be based on the statistics provided by the bank's counterparties (see table 1). Although these statistics may be incomplete, they reflect more real transactions. Generally speaking, the impact of the subprime mortgage crisis on China is likely to exceed the original expectations, and all parties concerned should keep a clear understanding of this.

[@ Header @] Table 1: Losses caused by the US subprime mortgage crisis to China's financial industry (unit: million US dollars)

(b) It will have an impact on the liquidity of China's financial market, which may aggravate asset price inflation and financial market volatility.

Due to the intensification of financial globalization, the linkage of global financial markets has become a reality. The impact of the subprime mortgage crisis on China's financial market is mainly reflected in several aspects: First, international capital flows across borders through hedge funds and private equity investment funds. China has completely opened its current account, so it is very difficult to supervise the cross-border capital flow. Second, foreign-funded institutions publish various opinions in the form of research reports, seminars and interviews, which affect market expectations. Third, the price relationship between A shares and H shares directly affects the pricing level of A shares. Fourthly, the drastic fluctuations in the global financial market have also greatly affected the psychology of China investors and their market expectations. Moreover, investors in the global market are paying more and more attention to the China factor, and the fluctuation of China's economic and financial market has certain influence on the investment in the global market.

(3) The negative impact on China's exports will gradually emerge.

Generally speaking, affected by the subprime mortgage crisis in the United States, the economic growth rate in the United States may slow down further in 2008, and economic recession may occur. Due to China's high dependence on American exports, the American economy has entered a recession, especially the decline of American consumption level, and the corresponding decline in demand for imported goods, which will curb the growth of China's exports from external demand. At the same time, the economic recession in the United States will increase the pressure of trade protection, and "Made in China" will face more anti-dumping and countervailing lawsuits, which will weaken the international competitiveness of China's exports and have a significant impact on China's economic growth and employment.

(D) The exchange rate system will be challenged.

The US subprime mortgage crisis has led to the decline of the US economy and the US dollar, which will inevitably have an impact on the RMB exchange rate mainly linked to the US dollar. At present, the imbalance of China's foreign trade is more prominent. The spread of RMB against the US dollar is upside down, the excess liquidity and inflationary pressure are gradually increasing, the inflow of hot money is accelerating, and the pressure of RMB appreciation is increasing. The adjustment of the Federal Reserve's interest rate has a considerable impact on the adjustment of the RMB exchange rate, and even has a direct impact.

(V) Risks in the real estate market will become more prominent.

The subprime mortgage crisis in the United States is a good warning for the real estate credit risk in China. China's real estate credit has no credit rating and risk pricing, and there are many false mortgages and false income assets. There is no securitization of credit assets, and the real estate credit risk is unknown and relatively concentrated in the banking system.

(6) Overseas investment faces greater market risks.

At present, the turmoil in the subprime mortgage market in the United States has spread to the ordinary corporate bond market, leading to a sharp drop in corporate bond prices. In order to seek the safety of funds, more funds will flock to US Treasury bonds, and the dollar portfolio and asset pricing will be readjusted, which will bring huge market risks to China's huge foreign exchange reserve investment and Chinese banks' use of foreign exchange assets.

(7) Impact on the effectiveness of monetary policy.

The trend of future interest rate policy after the continuous interest rate increase by the Federal Reserve and the economic situation in the United States have a considerable direct impact on China's monetary policy. With the expectation of further appreciation of RMB and increasing inflationary pressure, the operating space of monetary policy is getting smaller and smaller. It is not excluded that international capital will enter China's asset market through various channels, so as to prevent the subprime mortgage crisis in Europe and America from aggravating China's asset price inflation. At the same time, the accelerated inflow of hot money will also have a hedging effect on the central bank to curb excess liquidity, further pushing up the China stock market and housing prices.

Third, some suggestions to deal with the subprime mortgage crisis in the United States.

In the short term, the following measures should be the top priority:

(A) to establish and start the crisis emergency mechanism

First, establish an inter-departmental emergency response mechanism, start a working group, track, analyze and report the occurrence and development of the crisis at any time, and change the monthly reporting system of the CBRC to the reporting system at any time. Second, establish a working mechanism for timely information exchange, supervision and coordination with the United States, Japan, Europe and China, especially for cross-border trading activities of large financial institutions and hedge funds, and exchange opinions and positions of countries on policy intervention at any time. Third, a financial decision-making advisory committee composed of regulators, professionals, experts and scholars should be set up as soon as possible to provide professional advice to the Central Committee and the State Council on major financial decisions.

(2) Stabilize market expectations and maintain investor confidence.

First, take measures as soon as possible to stabilize the expectations of the financial market, especially the stock market, and maintain investor confidence, such as clarifying the policy intention and specific trends of accelerating the listing of non-tradable shares. The second is to reduce the tax burden of securities transactions, impose unilateral levy on the securities sold, and encourage the investment concept of holding stocks for a long time. Third, when the external market environment fluctuates violently, the reform of basic systems such as stock index futures and margin trading will be suspended. The fourth is to slow down the stock supply in the short term, suspend large-scale refinancing activities, and strictly review the use of refinancing funds.

(3) Deciding macro-control as appropriate.

In view of the increasingly severe world economic situation, in order to avoid excessive and overshoot of macro-control, we should pay close attention to the changes in the international economic situation, the development of financial markets and the policy intervention of various countries, and evaluate and adjust the macro-control policies and specific measures according to China's actual situation. All kinds of problems and new situations in the implementation process should be solved in time to improve the control effect.

In the long run, we must improve the relevant system design and its adjustment:

1. Change the development mode of the real estate market and clarify the position and role of the government in this market.

We should fully consider the different credit of borrowers and divide the low-income class into housing rental market and low-rent housing market. The credit risk of low-income groups is generally high, and they are sensitive to interest rates and house prices. If they rely heavily on commercial banks to obtain mortgage loans, it will undoubtedly increase systemic risks. On the one hand, in order to protect the housing rights of the low-income class, it is urgent to develop and improve the housing rental market to match the low-rent housing market. This goal can only be truly implemented if it is coordinated with other systems such as the personal and family property declaration and registration system and the corresponding tax supervision system. On the other hand, in order to guard against the risks of the banking system, it is necessary to strictly control the standard and proportion of housing loans issued by commercial banks, and limit mortgage loans and development loans for pre-sale houses.

2. Improve the design of real estate financial system, pay attention to the hidden risks behind housing mortgage loans, and combine the suppression of housing price bubbles with the control of bank risks.

When the real estate development, operation and consumption activities all depend on the loans of commercial banks, the real estate market and commercial banks will be both glorious and lose. In order to reduce the negative impact of fluctuations in the real estate market on commercial banks, while changing the real estate financing methods and strengthening innovation, we also need to pay attention to strengthening the internal control of commercial banks to prevent the decline in loan quality. We should pay full attention to the lessons of American subprime mortgage crisis, strictly ensure the implementation of down payment policy, and take strict credit review before lending to avoid the phenomenon of fake mortgage. At the same time, we should also improve the credit risk rating of personal housing mortgage loans, speed up the low-end and basic work in the banking system, and make the initial information such as loan risk, credit status and default probability very accurate. Domestic regulatory authorities should pay more attention to the accuracy of this information supervision. In addition, it is urgent to reform the organization and management system of housing accumulation funds in various places and set up government-supported housing mortgage banks and housing mortgage securitization institutions as soon as possible.

3. We must pay more attention to the prevention of financial risks while carrying out financial innovation.

When designing the financial market system, especially developing financial derivatives, we must fully understand its two sides. Financial derivatives not only have the function of dispersing risks, but also have the function of amplifying risks. Financial derivatives provide liquidity for lenders and reduce financing costs, and meet different preferences of investors by redistributing risks. Securitization of credit assets has also effectively alleviated the situation that risks are excessively concentrated in the banking system. Therefore, financial innovation still needs to be promoted. At the same time, we should strengthen the supervision of the development of derivatives market and strictly control risks, such as strictly controlling the upper limit of leveraged transactions when formulating various policies, avoiding excessive use of leverage effect and avoiding the spread of single market risks to other markets.

4. Strengthen global coordination of financial supervision.

There are some defects in international financial supervision, such as asymmetric information between markets, lagging supervision and lack of coordination mechanism, which are easy to amplify the impact of risks. Financial innovation can't change the benefits and risks of the real economy behind financial products, and financial innovation can't change the fluctuation of macroeconomic fundamentals. The only thing that financial innovation can do is the division and distribution of various benefits and risks. In the changing system and turbulent market environment, managing all kinds of risks on a global scale has become a huge challenge for global investors. The global activities of hedge funds, banks and other institutions under the condition of mixed operation of financial markets and the characteristics that the crisis may spread to the world make the global coordination of supervision very important. China's capital account control may be able to avoid direct impact in the short term, but it cannot completely avoid its negative impact. Therefore, we should take more active measures to strengthen the global coordination of financial supervision.

On March 17, the share price of American investment bank Bear Stearns fell by 84% and will be acquired by JPMorgan Chase at an ultra-low price; Lehman Brothers' share price has also fallen by more than 50% in the past two weeks. Although European and American governments have introduced rescue measures, the impact of the subprime mortgage crisis is still expanding. Therefore, it is necessary to further analyze the impact of the subprime mortgage crisis on China's banking industry.

First of all, the direct impact of the subprime mortgage crisis on Chinese banks is limited, but the indirect negative impact can not be ignored. Judging from the publicly disclosed information, there are only a few domestic commercial banks that participate in the investment of American subprime debt, and the amount is not large, so the direct impact is indeed limited. Therefore, the negative impact of the subprime mortgage crisis on Chinese banks is mainly indirect, mainly by affecting the external operating environment of Chinese banks. Specifically, the indirect negative impact of the subprime mortgage crisis on Chinese banks is mainly manifested in the following aspects:

First of all, the business activities of overseas institutions of Chinese banks will be affected. When many well-known financial institutions suffer serious losses or even fall into crisis, consumers' confidence in financial institutions will certainly be hit, thus affecting the operating environment of the entire banking industry. This negative impact is particularly evident in the financial markets of the United States, Europe and Japan. China's large commercial banks have overseas institutions in the three major economies of the United States, Europe and Japan. It is difficult for these overseas institutions to avoid the negative impact of the subprime mortgage crisis when they conduct business locally.

Second, the subprime mortgage crisis has increased the external risks of China's economic development, and affected the economic growth of China to some extent by affecting China's exports and the favorable macroeconomic environment for Chinese banks to operate in China. The subprime mortgage crisis has slowed down the world economic growth, especially in the three "hardest hit areas" of the subprime mortgage crisis-the United States, Europe and Japan, which will greatly reduce China's exports this year and ultimately affect China's economic growth. The reason is that China's economic growth has always been highly dependent on foreign countries. In the past two years, 32% of China's GDP growth came from net exports, and 48% of its exports were shipped to the United States, Europe and Japan.

Under the influence of the subprime mortgage crisis, China's macro-control policies and other factors, China's economic growth will obviously slow down this year (Premier Wen also put forward the goal of GDP growth of about 8% this year in the government work report), and the profit rate of the rapid growth of Chinese banks will definitely decline.

Third, the loan risk of export-oriented enterprises has increased. The subprime mortgage crisis has led to a decline in China's export demand, a decline in the profits of export-oriented enterprises in China, and even a survival crisis for some small and medium-sized enterprises. The risk of China Commercial Bank issuing loans to such enterprises has increased.

Fourth, the income of intermediary business will be negatively affected. In 2007, the bull market of China stock market made the intermediary business connected with the capital market grow rapidly, which promoted the surge of non-interest income and increased the contribution rate of intermediary business income to profits. Compared with the same period in 2006, the average growth rate of intermediary business income of the four major state-owned listed banks in China in the first half of 2007 was over 70%. However, with the unexpected development of the subprime mortgage crisis in the United States, the international financial market fluctuated violently. It may be difficult for China stock market to reproduce last year's "bullish" this year, and the income growth rate of related intermediary business of Chinese banks will definitely be affected.

Secondly, in order to cope with the indirect impact of the subprime mortgage crisis, Chinese banks need to further strengthen risk management. Although the subprime mortgage crisis has dealt a heavy blow to the global economy, under the guidance of the Chinese government's flexible macro-control policies, as long as China's commercial banks keep a clear understanding of the impact of the subprime mortgage crisis and strengthen risk management, the adverse impact of the subprime mortgage crisis can be controlled within a small scope. In view of the subprime mortgage crisis, I think Chinese banks should focus on the following work:

First, pay close attention to the development of subprime mortgage crisis and the direction of international capital flow, closely monitor customers' situation, strengthen post-loan management, and prevent credit risks of export foreign trade enterprises. This year, the appreciation of RMB against the US dollar will exceed that of last year, and it is expected to fully appreciate against major currencies. In addition, the current RMB interest rate is 4. 14%, the US dollar interest rate is 2.25%, and the spread is 189 basis points, which has increased the motivation for international speculative capital to continue to flood into China. However, once the U.S. economy rebounds and the U.S. starts to attract foreign investment with a strong dollar, a large amount of speculative capital in the early stage will leave China. History tells us that the inflow and outflow of capital are sometimes as fast as the tide.

Second, pay close attention to the credit risk of financial institutions in the United States, Europe and Japan. In cooperation or equity investment with financial institutions in the United States, Europe and Japan, we should pay attention to the other party's holdings of assets such as American subprime loans and be alert to whether the other party's risks have changed significantly.

Third, we should learn from the lessons of American subprime mortgage crisis and strengthen risk management. The relaxation of credit risk management in the United States and the bursting of the real estate market bubble directly led to the subprime mortgage crisis. We must learn this lesson seriously, strengthen the risk review of real estate loans in recent years, and solve the common problems of risk prevention and internal management in China's banking industry. At present, all major commercial banks are promoting integrated operation, among which, how to prevent risks from spreading among different subsidiaries or businesses and how to establish a comprehensive, vertical and effective risk prevention and control system are particularly important.