Cheung Kong Graduate School of Business, Princeton University’s Center on Contemporary China and The Julis Rabinowitz Center for Public Policy and Finance hosted a one-day conference with the latest insights from leading experts on US-China relations, finance, investment, politics and social issues last October 3rd at The University Club of New York.
Wei Xiong, Trumbull Adams Professor of Finance, Princeton University, presented his research on systemic risk in China. Xiong noted that real estate is the most important source of systemic risk in China citing the following facts: housing holding are households' largest assets, mortgages are the main source of personal consumer finance, real estate assets are firms' collateral for borrowing, local governments heavily rely on land sales for revenue and banks are heavily exposed to real estate. While housing prices have grown dramatically over the last decade, specially in major cities such as Beijin and Shanghai, Xiong is optimistic. He believes that it is unlike that a nation-wide housing market crash or debt crisis will take place in China in the foreseeable future. He contends that the ultimate risk lies in China's rate of economic growth. If growth stays above 6% for a long period of time, the economy will be able to deal with the high housing prices and debt level. However, should growth quickly slow below that threshold, trouble would erupt in many fronts, not just the housing market.
To view the slides of Wei Xiong's presentation on Housing and Systemic Risk in China click HERE.
The conference's complete agenda is below: