WASHINGTON – U.S. Housing and Urban Development Secretary Andrew Cuomo reached agreements during his May 19-24 trip to China that will help China establish a secondary mortgage market and collaborate with the United States on affordable housing and urban development projects.

Opening his visit in Shanghai May 21, Cuomo launched a housing finance pilot project that will assist the Chinese government and banks to set up a secondary mortgage market similar to the Federal Housing Administration (FHA), giving Chinese homebuyers sufficient access to credit.

The pilot project, which HUD and the Chinese Construction Ministry hope to launch by the end of the year, calls for a series of substantive working groups comprised of officials from the U.S. public and private sectors, U.S. private financial institutions, and the Chinese government and financial industry. Discussions among the working groups will result in an action plan for a pilot residential mortgage securitization program to be implemented by Chinese financial institutions.

"The application of this program will be a historic step for the Chinese and the way homes are brought and sold in this country," Cuomo told a forum hosted by MetLife Insurance in Shanghai. "By enhancing primary institutions and creating a secondary mortgage market, China will be able to generate more resources that will be used to increase homeownership by Chinese families."

HUD will organize and host a tour in July for Chinese finance experts to study U.S. primary and secondary mortgage markets, Cuomo added, and establish one-to-two week internships for Chinese officials with private companies in the United States later this year.

In Beijing, Cuomo held talks with Chinese Premier Zho Rongji and signed the first-ever agreement between the United States and China to collaborate on affordable housing and urban development projects.

Cuomo’s meeting with Zhu focused on the human and economic issues at the heart of urban housing, a central component of Zhu’s program to reform China’s economy by, among other things, ending subsidized housing and promoting homeownership among the Chinese.

The agreement Cuomo and Chinese Construction Minister Yu Zhengsheng signed May 24 will begin with a project under the U.S.-China Housing Initiative to design and build a model community of affordable, low-density housing for more than 1,000 Chinese families.

"The people of the United States and China will both benefit from this unique collaboration on housing issues," Cuomo said. "By sharing experiences, we strengthen our abilities to provide safe, decent, affordable housing, and move forward to create prosperity and improve the quality of life for families in our nations."

Under the agreement, the United States and China will collaborate on the design of a 50-acre neighborhood combining U.S. and Chinese design approaches. As part of the neighborhood, the Chinese will build a demonstration building that will include building materials donated by U.S. manufacturers. Construction of the demonstration building is expected to begin in July and be completed by the middle of 2001.

To date, HUD has secured more than $75,000 in U.S. private sector donations to the demonstration project from corporations, including American Forest and Paper, Dessen Homes, and MetLife Insurance.

In addition, the United States will provide assistance for Chinese builders with site management guidance on American design and technology, work with China to develop a set of building guidelines for the entire development, and provide advice on financing packages for beneficiaries and setting criteria for affordability.

Cuomo and Yu signed the agreement at a meeting of the U.S.-China Residential Building Council (RBC). The RBC was set up last November as part of the U.S-China Housing Initiative in Washington. The RBC, which consists of American and Chinese business and housing officials, was established to exchange information and to cooperate on housing development.

In March 1998, Premier Zhu introduced a package of reforms intended to stimulate China’s economy. He announced that subsidized housing traditionally available to Chinese workers would be phased out and that workers would be encouraged to buy their own homes from the state or pay a more commercial rent. The reforms called for workers to use their savings, along with the one-time housing subsidies they receive, to buy their own houses.

In response, last year President Clinton announced U.S. support for China’s goal of increasing homeownership and called for the creation of the U.S.-China Residential Building Council to promote new technologies and energy efficient materials to build sturdy and affordable homes. The President also called on the Department of Commerce to send U.S. experts to China to discuss how to build a stronger housing finance system by, for example, strengthening property rights and developing stronger mortgage markets.