CHINESE banks should strictly control lending to the country s major property developers, the banking regulator said Thursday, indicating that it will continue to tighten its grip on lending to sector amid concerns about deteriorating loan quality.
Liu Mingkang, chief of China s Banking Regulatory Commission (CBRC), has repeatedly warned of the risks in loans to the property sector. But the regulator s latest statement goes a step further, the warning has now been extended to include big property developers usually seen as better placed to repay loans. The statement posted on the CBRC Web site didn t elaborate.
Central bank data showed last week that China s loan growth to the property sector continued to slow at the end of September from the preceding quarter. But growth in loans extended to property developers showed some recovery, with end-September outstanding loans up 21.5 percent from a year earlier, 5.7 percentage points higher than growth at the end of last year.
The government has taken a series of measures to cool the surging domestic property sector, such as increasing downpayment requirements, halting lending for third homes and penalizing developers that hoard land. Earlier this month, the central bank also raised interest rates for the first time in nearly three years.
Property developers reported stronger sales in the third quarter and said that their debt generally rose in tandem with stronger sales during the same period.
Shanghai-listed property Poly Real Estate Group Co. said Tuesday that its liabilities are still within reasonable levels and that its faces little pressure in repaying its short term debts.
Analysts have highlighted that property prices haven t dropped partly as developers still have strong cash positions, so that they don t have to resort to heavy discounting if sales slow.
However, some property firms have recently said that it has become tougher to secure loans and financing for new projects.
The CBRC also traditionally tightens grip on bank lending in the last few months of the year in a bid to ensure that the annual loan target is met. The regulator has targeted to keep the banking sector s annual new yuan loans at around 7.5 trillion yuan (US$1.119 trillion) this year.
In the statement, Liu urged banks to take preemptive measures on loans to property companies deemed high-risk, while allocating loans to reasonably meet the demand for developing lower-end houses.
He again urged banks to control their exposure to local government financing vehicles and ensure that their daily liquidity risks are properly managed.(SD-Agencies)
