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Last updated at: (Beijing Time) Tuesday, March 02, 2004

Nation tightens screws on property bank loans

China is clamping down further on property lending, telling banks that real estate loans can't make up more than 30 percent of outstanding credit, the latest move to head off a bubble that might burst the booming economy.


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China is clamping down further on property lending, telling banks that real estate loans can't make up more than 30 percent of outstanding credit, the latest move to head off a bubble that might burst the booming economy.

New rules by the China Banking Regulatory Commission also order banks to tighten their procedures for giving mortgages to individuals by conducting more extensive checks into the incomes, jobs and assets of borrowers.

The sector watchdog said it aimed to help banks "understand and effectively discern real estate loan risks".

China's banks have lent heavily to property projects and have also stepped up personal mortgages, leading policy makers to fret that the sector is over-invested and could collapse if supply gets too far ahead of demand.

The bustling construction has also driven up demand for goods like steel, cement and aluminum, which has fuelled double-digit price rises and help push the annual inflation rate to seven-year highs.

Earlier this month, Premier Wen Jiabao ordered a clamp-down on lending to several red-hot sectors, including property. The central bank also said it would trim new loans this year by 13 percent from last year.

The new rules, seen on the banking commission's Web site at www.cbrc.gov.cn, say banks should conduct yearly audits of their property loans, refuse loans to developers without proper permits and take steps to prevent misuse of loans. Lenders should limit personal mortgages to 50 percent or less of a borrower's income, and total debt by the borrower should not pass 55 percent, they said.

Source:Xinhua


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