Chinese banks demanding proof that consumer loans are not being used to buy property
Holders of long-term household loans are being asked to show receipts as concerns grow that money is being funnelled into the red-hot housing market
China’s commercial banks have begun asking clients to submit “proof of use” for consumer loans, as the government tightens regulations on concern that such loans are being used to buy property and are helping to fuelling a property bubble.
Customers of China Merchants Bank with loans upwards of 10,000 yuan (US$1,517) are being requested by text messages to submit proof of use, according to messages seen by the Post. Media reports said customers of some banks are required to prove that loans were not being used inappropriately.
Household short-term loans soared in the third quarter by 1.53 trillion yuan (US$232 billion), almost three times more than a year ago, according to data released by the People’s Bank of China on Saturday.
“I am afraid a considerable part of consumer loans has flown into the property market,” said Iris Pang, an economist with the Dutch bank ING. “If you look at the structure of the consumer loans on the mainland, you will find it strange because a lot of them have extremely long loan tenures, like 10 to 20 years. What makes you need 20 years to pay back a consumer loan that enables you to buy a television? It is very likely that the money is spent on houses,” she said.
The fast build up of loans in the household sector has caught the attention of regulators, and the China Banking Regulatory Commission (CBRC) announced it would investigate and said last month that China should “learn from the subprime mortgage crisis in the US”, and prevent consumer loans from being used to “fuel property bubbles”.
Since September, several banks in southeast China’s Guangdong province have suspended consumer loans with tenures longer than 10 years, sources said.