Mortgage Enforcement and Public Regulatory Actions in China in Selected Chinese Cities

This paper serves as a primer to examine the issues extant in the Chinese mortgage enforcement system; to analyze overbuilding and vacancy in three Chinese cities; and to explore the possibility of land banking as a metropolitan policy in China. A careful analysis of the Chinese mortgage enforcement system reveals that current institutions are inefficient and ineffective both in terms of realizing the creditor’s right of payments and in protecting the auction buyer’s expectation of a fair and efficient transaction. The core problem is that the laws fail to recognize local governmental interests in the property upon which is enforced, and has failed to define the local government’s roles during the mortgage enforcement process. As a result, local government does not have the necessary authority or experience to participate in the legal processes to enforce these failures and resorts to detrimental and radical “self-help”—use or abuse of its administrative powers—to protect its interests. Ultimately, this lack of jurisdictional clarity hinders free transfer of ownership. When mortgage enforcement generates an abundance of vacant and abandoned properties, local government lacks the effective legal tools to take control of the vacant properties that private parties are either unwilling or unable to take ownership and responsibility for.