Commercial banks should have more say in the market

At a meeting on May 12, Liu Shiyu, vice-governor of the People's Bank of China, urged the chiefs of some major commercial banks to accord preference to first-home buyers' demand for loans and charge them reasonable interest rates. But even after three weeks, the tight housing mortgage market has not shown any sign of easing. Instead, some commercial banks have raised their lending rates.

A recent survey conducted by a financial service company in 21 cities across the country shows that more than 40 percent commercial banks have charged first-home buyers 10 to 20 percent higher interest rates than the benchmark lending rate over the past half month. The rate is obviously higher than that imposed on homebuyers in April.

State-owned but independently run lenders have always followed the central bank's "window guidance", like the one on May 12, even if they are non-binding policy recommendations. The commercial banks' defiance of the central bank's latest guidance and the lack of appropriate response from the PBOC (or central bank), therefore, raise certain questions. Is this a presage of a change in financial management approach of China's top monetary regulator? Isn't the commercial banks' attitude toward individual housing loan seekers directly related to the chilly changes in the housing market over the past months?