China’s May mortgage and money supply growths slow as controls take effect

Growth in mainland China’s mortgage loans and money supply slowed in May, a sign that tightening measures to control property prices and reduce leverage in the country’s financial system are taking effect, according to central bank data released on Wednesday.

More broadly, economists said the growth of aggregate financing might slow down in the coming months due to regulators’ ongoing efforts, but the central bank also faced a delicate balancing act to defuse financial risks without choking economic growth.

Mid- and long-term household lending – a proxy of mortgage loans – grew by 432.6 billion yuan in May, down from 444.1 billion yuan in April and the monthly average of 486.7 billion yuan in the first quarter, according to data from the People’s Bank of China website.

“Mortgages and burgeoning household leverage aren’t major concerns now as tightening measures from major cities continues to take effect,” said David Qu, a market economist at ANZ in Shanghai, adding mortgages growth is set to slow down in the future.

Capital Economics economists Chang Liu and Mark Williams agreed. They wrote a note that the government’s efforts to cool the property market are continuing to bite.

Major cities including Beijing and Shanghai have increased down payment requirements, strengthened controls on selling prices, restricted purchases by non-locals and second-home buyers and cracked down on residential flats built on commercial and office land to curb speculation and irregularities.