China's banking regulatory body has urged commercial banks to take measures
to curb the increasing level of lending in the real estate sector.
China needs to significantly increase down payments for mortgages on
expensive homes and investment properties as part of measures to rein in bank
lending, according to Liu Mingkang, chairman of China Banking Regulatory
foreigner looks at models of residential buildings at a property company's
sales office in Shanghai. In China's richest city, the foreigners live in
the inner ring, outsiders in the next and natives in the outermost. [China
"Commercial banks need to keep a close watch on borrowers' repayment ability
and their credit status."
Liu made the statement at a meeting on Wednesday with China's major
commercial banks. The statement was posted on the commission's website Thursday.
"Banks should greatly promote loans for first-time home owners, but stop
granting mortgages for anyone other than the home owner.
"It should significantly increase down payments for those buying anything
more than their first home and for expensive properties, villas, commercial
properties and other speculative purchases," the statement said.
But CBRC did not specify by how much down payments should be raised.
Property prices in 70 large- and medium-sized Chinese cities witnessed an
average 5.5 per cent increase in the first quarter from the same period in 2005,
according to the National Bureau of Statistics.
The CBRC said it would take a targeted approach to controlling lending by
placing stricter requirements on banks that had capital adequacy ratios of less
than 8 per cent.
It would encourage certain types of property lending, while restricting
As well as targeting property lending, the commission said it was asking
banks to stop arranging set quotas of loans with local and provincial
governments - a major source of lending since the start of the year.
Much of the money has gone into fixed investment in property and other
The CBRC's move was seen as an attempt to keep China's rapid growing economy
Last month the central bank raised the one-year benchmark lending rate by 27
base points to 5.85 per cent in a bid to curb credit and investment growth.
China reported total loans of 20.6 trillion yuan (US$2.575 trillion), up 14.7
per cent over the previous year, at the end of the first quarter.
The central bank recently denied reports that it was considering increasing
down payment to 50 per cent from 20 per cent.
Liu's comments follow a six-point directive issued by the State Council last
week requiring government agencies to rein in what many have called runaway
property price increases in some cities.
An executive meeting of the State Council chaired by Premier Wen Jiabao vowed
to take necessary measures to improve the property market and curb rapid price
rises in major cities.