China’s banking regulator ordered lenders to take more care when making real-estate loans, widening efforts to prevent property speculators from causing asset bubbles and bad debt.
Banks should not lend to developers found by state agencies to have held land without building houses, the government said in a statement posted online on Friday evening. They should also stop approving new lines of credit to 78 government-controlled firms whose core business isn’t property development if they use collateral other than construction projects already in progress, the statement said.
China’s property prices rose 10.7 percent last month, the fastest pace in almost two years, fueling concern that record lending and inflows of capital from abroad are creating asset bubbles in the world’s third-biggest economy.
The government this month raised deposit requirements for buyers at land auctions to 20 percent of the minimum price to raise costs for developers. It also lifted banks’ reserve requirements twice this year and re-imposed a tax on home sales.
“We have to closely monitor China’s asset bubbles,” Liu Mingkang (劉明康), chairman of the China Banking Regulatory Commission, said on Friday at a conference in Beijing.
Property prices have changed “quite a lot in the past five years,” he said.
Former US Federal Reserve chairman Alan Greenspan said on Friday that there are “bubbles” in China, without indicating whether they were in property and stocks.
“There are significant bubbles in Shanghai and along the coastal provinces, but there’s some of that going back into the hinterlands as well,” Greenspan said.
The regulator’s latest order underlines concerns that banks may be at risk from companies that are speculatively raising capital backed by property investments.
“These measures are intended to urge developers with land to build houses and sell them quickly to increase market supply,” said Zhao Qingming (趙慶明), a Beijing-based senior analyst at China Construction Bank Corp (中國建設銀行), the nation’s second largest lender.
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