Mortgage Law in China: Comparing Theory and Practice

The first Chinese law focusing specifically on property rights became effective on October 1, 2007, which means that China\u27s breakneck real estate development before that date occurred in a nation with no published law of real estate. Thus those who have been buying, selling, and lending against Chinese real estate have been operating in a world of significant legal uncertainty. Even with the new code, property law as it is practiced is likely to diverge significantly from the published rules. This Article examines Chinese mortgage law as it actually operates in the field, focusing on both legal and business issues. I recently interviewed dozens of Chinese and Western lawyers, bankers, real estate developers, government officials, judges, economists, real estate consultants, law professors, business professors, real estate agents, law students, and homebuyers. The Article draws on these conversations to examine China\u27s budding mortgage law practices, including how they developed, how they comport with or differ from written laws, and what questions they leave unanswered. The Article describes the types of loans that are available to Chinese borrowers and the types of lenders that are making these loans. Next, it raises the question of what assets a borrower can offer to a lender as security for repayment. The Article then addresses the lending standards these lenders apply before they agree to extend credit. The discussion continues by examining the ultimate sources of these funds. The Article concludes by questioning how stable the Chinese banking sector actually is