The significance and role of financial innovation

1. Financial stability maintenance of financial stability also includes the stability of the banking system, and real estate loans in which is also a very important part. Since the reform and opening up, China's economy has entered a new historical stage of rapid development, and the residential condition of the residents and the appearance of the city has been greatly improved, which is a great achievement of the reform and opening up. And to vigorously and long-term development of the real estate industry, it is necessary to establish a real estate development financing system and real estate consumption financing system, including a composite multi-financing system. In short, China's real estate financial system are to be improved and developed, and long-term stable financial support policy is to achieve China's economic development, improve people's living standards, and cultivate pillar industries must be the system to protect. 2 real estate individual investors real estate investment has a large scale, long capital cycle and professional characteristics, which makes it difficult for the public investors directly involved, but the development of real estate finance (including financing) related investment products for investors to provide a diversified investment channels. From the current financial system in China, mass investors have not been effectively utilized because of the narrow investment channels. By the end of 2008, China's urban and rural residents savings balance of nearly 20 trillion yuan, the establishment of China's own real estate financial investment products, part of which will be attracted to the real estate industry, such as retail investors have the opportunity to purchase, including a number of large-scale commercial real estate trust units, so that they can enjoy the past, only large-scale real estate developers can hold large-scale high-quality properties of the right, will be conducive to the real estate market and the sustainable and stable development of the financial market. This will be conducive to the sustainable and stable development of the real estate market and the financial market. 3. Real estate institutional investors for many domestic institutional investors, at present, China due to the immaturity of the financial market, investment and financing products, coupled with the country's institutional investment in real estate have greater restrictions, there can not yet be a safer way to invest in real estate, this situation has been realized by many industry insiders, and a number of investment and financial institutions are also aware of the huge business opportunities contained here. Over the past few years some people from institutions such as insurance companies, trust companies and fund companies have also been very concerned and willing to participate in this market. Therefore, how to smoothly carry out real estate financing and investment business has become a great concern of the industry. For institutional investors, investing in real estate investment and financing is beneficial and necessary for the long-term stable and diversified development of their business. 4. Real estate companies As mentioned earlier, real estate development is characterized by large investment and long cycle. For a long time, China's real estate industry, large loans is to promote the real estate development of the main capital power, real estate development is very dependent on bank loans, about 70% of the real estate development funds from the support of bank loans. Therefore, whenever the government in China to carry out macro-control or real estate projects have some problems, many real estate enterprises are faced with capital turnover difficulties, operating difficulties, which is also caused by China's real estate development enterprises, one of the main reasons for the shorter life. The development of real estate finance, including investment and financing products to the real estate business has brought life, real estate companies through these financial products can greatly broaden the financing channels, reducing the reliance on indirect financing, thereby reducing business risks. 5. Commercial banks to develop real estate financing innovation can first meet the real estate market on the part of the demand for credit funds, especially in the increase in direct financing channels at the same time, so that the commercial banks themselves have a better anti-risk capacity. From international experience, once the economic downturn or real estate bubble burst, the proportion of bad and doubtful debts is easy to rise, and the implementation of real estate investment and diversification of financing channels so that developers have more financing channels at the same time to reduce the dependence on banks. Secondly, China's bank real estate lending business is developing rapidly, but when it develops to a certain scale, the bank may face a large funding gap, as well as short-term sources of funds and housing loan funding needs long-term contradiction; this will undoubtedly bring new financial risks, not in line with the bank's asset liquidity, security requirements, easy to cause liquidation crisis, resulting in financial risks. 6. Securities market Development of real estate financing innovations on China's real estate investors, real estate companies, commercial banks, the positive effects of now we have reached **** knowledge, but the impact on the securities market in this regard discussed less, in fact, this is very important. At present, one of the biggest problems in China's securities market is that the product structure is unreasonable, high-risk products account for the main position in the securities market tradable varieties, about 70-80% of the higher-risk equity products; low-risk product varieties are single, not only but the market size is small, and the varieties are extremely monotonous, only a small number of less liquid treasury bonds and a small number of corporate bonds, etc., to meet the needs of the vast number of individual and institutional investors. It cannot meet the needs of the majority of individual and institutional investors. Therefore, vigorously develop low-risk market products, including more real estate investment and financing products, in order to rationalize the product structure of China's securities market, is one of the focuses of the development of China's securities market. Meanwhile, for the construction of Shanghai as an international financial center, the lack of investment products will likewise diminish the ability to attract foreign investment and the status of becoming an international and regional financial center.　The invention and innovation of credit derivatives and investment-oriented structured products, as well as the development of the market, contribute to the maintenance of financial stability, as these products and market activities accelerate the diversification and mitigation of credit risk and liability stress. Operational risk, traditionally carried by banking institutions, is spread over a wider area and on a broader basis to various types of investors. As a result, the ability of banking institutions to withstand credit risk, market risk and profitability can be strengthened somewhat.

It is true, however, that credit derivatives and structured investment products and their market activities introduce new risks and vulnerabilities to the banking sector. Because these benefits mentioned above have to be based on the fact that the market has to have a good legal environment, good rules of the game and, more importantly, depends on high liquidity on all submarkets. If there is a risk of disruption of liquidity in such submarkets, the overall financial stability becomes more problematic. Liquidity disruptions in such sub-markets arise mainly from the homogeneous homogeneity of market participants and from the gap between expectations and reality of liquidity.