Practical obstacles and optimization paths for mortgage financing of water withdrawal rights as immovable property: a case study of the “Hubei Model”

The Civil Code of the People’s Republic of China has established the status of water withdrawal rights as usufructuary rights, providing a legal basis for their transformation into mortgageable financial assets. However, given the contradiction between the dynamic nature of administrative control and the stability of financial assets in the mortgage financing of water withdrawal rights as immovable property, financial institutions still face the dilemma of “dare not lend” in practice. Taking the “Hubei Model” as a case study, this paper analyzes the bottlenecks in this kind of financing in the evolution from confirmation and access to risk management and control by combining the previous experience of its standardized confirmation and registration system and the coordination mechanism of “government-enterprise-bank”. This paper finds that the current Model is subject to macro institutional constraints, and there are bottlenecks in value assessment, ownership stability, risk quantification, and mortgage realization. Given the above bottlenecks, this study constructs an optimization path compatible with public law constraints and financial risk control: locking value through the income method that internalizes positive externalities, supplemented by binary registration and subrogation compensation rules to stabilize mortgage expectations; the risk pricing model based on hydrological probability is utilized to quantify physical risks stemming from water resource randomness. In the stage of mortgage realization, asset exit channels are facilitated by leveraging secondary markets and storage-and-purchase mechanisms.