Macquarie Bank confirmed recently that it is advising the China Construction Bank on setting up a pilot program to start mortgage-backed securitization in Shanghai. The bank, one of Australia's leading originators of home mortgages, is now working on getting approvals for the program from the central bank, the People's Bank of China (PBOC), said Tony Gill, managing director of Macquarie Securitisation in Sydney.
Shanghai, one of China's most developed financial markets, has long been studying the merits of MBS and laying the groundwork of a domestic mortgage market. The PBOC recently mandated its Shanghai branch to carry out a feasibility study on the subject (ASRI 5/31/99, p.16).
China Construction Bank, one of the country's big four state-owned commercial banks, is the second biggest provider of home loans in Shanghai, and has reportedly expressed interest in taking a lead role in issuing MBS.
Although most Chinese live in government-provided housing, mortgages will become more common as housing reform kicks in and the government encourages people to start buying their homes, said Gill.
"Only about 5% of people in China live in homes owned with a mortgage. There's still a lot of issues to be worked out such as affordability and low wage levels, but as interest rates fall and earnings and restructuring increase, more and more people will be able to afford their homes," he commented.
Although Macquarie has not been mandated for a deal, the bank is working closely with government officials to create the necessary framework for the program over the medium term, he added.
Macquarie's pilot MBS program which has the political backing of former Australian prime minister Paul Keating received a boost from the recent launch of the AMP China Housing Program, a $50 million investment project funded with AMP Asset Management that will develop residential property throughout China. "Establishing an MBS program naturally follows on the AMP initiative, since it's an extension of our work in bringing capital into China to assist housing finance," Gill said. VC