Abstract: Subprime Crisis gave rise to the global financial crisis. It happened as a result of liquidity shortfall in the age of surplus liquidity, leading to global crisis beginning with the Wall Street, USA. In the Subprime Crisis, exchange rate is not the essential cause anymore. The paper reexamines the financial leverage effect, proposing that the system of risk -evading self -expansion, financial derivative products, which transfer credit risks, and the conflicts of monetary policies are the essential causes for the expansion of subprime crisis into global financial field. It has effects on foreign markets, financial market and real economy, leading to risks facing the financial system of China.