Chinese regulator warns small banks against chasing property sector loans

Name: 40 years of opening up and reform: How property became a driving force in the economy
Uploaded: 2021-06-02T09:23:51.000Z
Duration: 1 min 58 s
Description: 40 years of opening up and reform: How property became a driving force in the economy

Some medium to small regional banks have stepped up to compete for property sector loans, as bigger banks reduce their lending, CBIRC executive says

Lending to the sector recorded its slowest growth in eight years in April

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A construction site in Shenzhen. In the first quarter of this year, banks’ loans to the property sector totalled US$7.8 trillion, a year-on-year increase of 10.9 per cent. Photo: Reuters

Pearl LiuandGeorgina Lee

Published: 5:23pm, 2 Jun 2021Updated: 10:57pm, 2 Jun 2021

China’s banking regulator has warned the country’s smaller banks against rushing to grow their property sector loans after a cap on lending by big banks to the highly leveraged industry showed some initial success.

The China Banking and Insurance Regulatory Commission (CBIRC) will pay close attention to growth in property sector loans, and it will identify and closely monitor banks with a high proportion of such lending in their portfolios, Liu Zhongrui, a deputy director of CBIRC’s statistical information and risk surveillance department, said on Tuesday.

“Some medium to small regional banks have stepped up to compete for property loans business, as the bigger state-owned banks reduce their lending,” he said. The regulator will adopt “stricter measures” against lenders that fail to heed its warning. “For banks with a relatively high ratio of newly added property loans, we will put them under a separate list, and require them to sensibly control the growth rate of property loans,” Liu added.

The warning came as Beijing tries to maintain its grip over China’s debt-fuelled property sector. It wants to cool the property sector and guard against systemic risks in the financial system stemming from excessive real estate lending and speculative buying, especially at a time when economic growth in China faces uncertainties arising from the coronavirus pandemic, despite four straight quarters of growth since the second quarter of last year.

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40 years of opening up and reform: How property became a driving force in the economy

The excess flow of funds into the property sector has begun to see a turnaround, said Liang Tao, the regulator’s vice-chairman.

Lending to the property sector recorded its slowest growth in eight years in April, rising 10.5 per cent year on year. Banks’ lending to the sector year-to-date has also been lower than to all other sectors, Liang said.