China’s property market abuzz as authorities walk tightrope to recall illegal loans
- Letter circulating online requested the repayment of a loan and the interest ‘because the borrower failed to fulfil the purpose of the debt according to the loan agreement’
- Outstanding household borrowing at the end of 2020 stood at 63.19 trillion yuan (US$9.7 trillion), the equivalent of 62 per cent of Chinese gross domestic product
China’s property market was abuzz last week after a photo distributed online showed a bank letter demanding early repayment of a personal loan of nearly 300 million yuan (US$46 million).
The letter, issued by the Shanghai branch of a Chinese bank, requested the full repayment of the principal loan and the interest by the end of March “because the borrower failed to fulfil the purpose of the debt according to the loan agreement.”
The notification letter was posted online on Wednesday and had been roughly edited to obscure the name of the borrower, the bank as well as the loan reference number.
At the same time, Beijing Business Today, a state-backed newspaper, cited unnamed industry sources as saying that Beijing-based banks have stated they are following strict compliance orders from regulators to demand early repayment of all loans flowing into the property market in violation of regulations.
The property sector is the single most important driver of the Chinese economy, and arguably the biggest risk as well
In addition, the official Nanfang Daily reported that several banks in Guangdong have restructured in advance their lending suspected of being used illegally to fund property purchases and have terminated the credit lines with customers determined to be using loan proceeds illegally to prevent any embezzlement of funds.