Bank regulator plans review of developers' debts

09:17, November 03, 2009      

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China's banking regulator plans to review debt levels at some real estate developers on concern the companies' borrowings are fueling excessive gains in property prices, a person familiar with the matter said.

According to a report by the Bloomberg News, China Banking Regulatory Commission, the watchdog, wants to reduce leverage at developers that bought land at inflated prices and at large state-owned companies that have entered the property market.

China Banking Regulatory Commission

Excessive borrowing by some developers threatens to cause an increase in delinquent debts should prices collapse, the Bloomberg News quoted the person as saying. China's home prices rose at the fastest pace in a year in September as government stimulus spending drove a recovery in the world's third-largest economy.

"Should lending be tightened, the impact on the property market would be huge," said Liu Xihui, a Shenzhen-based analyst at Ping An Securities Co. Restrictions on second mortgages imposed after June 30 "had a big impact" on demand both among property investors and people looking for new homes.

At the end of August, liabilities exceeded 90 percent of assets at more than 160 developers that have borrowed at least 50 million yuan each from banks, the person said. New loans for real-estate development surged 121 percent from a year earlier in the first half to 404 billion yuan, according to the People's Bank of China's latest quarterly report.

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