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Bloomberg
China’s regulators will impose caps on banks’ lending to the real estate sector for the first time, in their latest efforts to prevent systematic risks after a series of property curbs in recent years did little to damp buyer enthusiasm.
Under the new mechanism, loans to developers will be capped at 40% for the nation’s largest state-owned lenders while banks’ mortgage lending should be no more than 32.5% of their outstanding credit, the People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission said in a joint statement. Those exceeding the cap will have a grace period of up to four years to meet the requirements.
The move underscores authorities’ determination to keep a tight rein on the bubble-prone sector and curb leverage at some of the nation’s largest developers. China’s home prices kept rising despite years of regulatory clampdown, stoking social discontent and pushing up financial risks as lenders increased bets on the sector to bolster profits.
A gauge of Shanghai-listed developer stocks slumped 10% in 2020, while the benchmark Shanghai Composite Index
rallied 14%.
China’s housing watchdog and central bank have asked 12 developers including China Evergrande group, Sunac China Holdings and China Vanke to report their financing, total debts and business data on the 15th of every month to monitor their financial healthiness.
Credit growth rebounded as monetary-policy easing continues to support the recovery from the pandemic.
Banks will be put into five categories and subject to different ceilings on their loans to developers and home buyers.
The new policy can “help market participants form stable policy expectations, and help promote stable, healthy and sustainable development of the real estate market,†the statement said.