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Kandel on China trade
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May 26, 2000: 12:37 a.m. ET
U.S. to offer aid, expertise in developing private housing, mortgage markets
By CNN Financial Editor Myron Kandel
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NEW YORK (CNNfn) - In the aftermath of the House vote this week on the trade status for China, another development concerning that country has aroused my interest. Its potential impact on the Chinese economy could even rival international trade considerations. And it comes from an unlikely source - the American housing market.
Andrew Cuomo, U.S. Housing Secretary, has just returned from a visit to China, where he discussed American housing practices with Chinese officials. Private home ownership is one of the landmarks - and one of the great strengths - of the U.S. economy. And one reason for that is the ability of Americans to obtain home mortgages at relatively low costs and down-payments (even despite this year's big jump as a result of the Federal Reserve's hike in interest rates). And in recent years, the development of an active market in securitized mortgage instruments has given lending institutions even more funds with which to provide housing loans.
 During his four-day visit, Cuomo signed an agreement pledging U.S. government assistance to help China both build new housing and develop a secondary mortgage market. The new housing, while substantial, is largely symbolic in the over-all picture. But it will demonstrate how U.S. materials and expertise can find a market in China. The Department of Housing and Urban Development will help design and build two 50-acre housing developments, one in Beijing and the other in Shanghai, with building materials donated by American companies. That, hopefully, will be an example for even more-ambitious and comprehensive projects to be built by private enterprise in the future.
"There is obviously a tremendous housing need" in China, Cuomo said, adding that housing could be the icebreaker for China's transition to a market economy.
But even more importantly, I think, Cuomo said the Clinton Administration will help Chinese officials and banks develop a secondary mortgage market. That could be done either through a government-sponsored agency modeled after Fannie Mae in the U.S. or through China's central bank. That could even be done on an entirely private basis, as several other nations are considering doing, although that may be too big a step for China at this time.
Cuomo emphasized that setting up a primary mortgage market is the necessary first step. "It's a tremendous opportunity for U.S. banks, because we do this better than anyone else on the globe right now," he said.
To begin the process, the Housing Department is organizing a tour for Chinese finance officials to study the U.S. primary and secondary mortgage markets.
The Chinese government has already begun to transfer housing to private ownership. That nation, with its unusual combination of a communist political system and an increasingly free-market economy, has a long way to go in making good housing available to its people. The U.S. system is a proven winner. Now let's see if China is really ready to embrace it. 
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