China stocks drop on tightening, bank levy (2)

15:27, April 22, 2010      

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It said monetary tightening, along with steps to control housing demand and manipulation, are the right policy choices for the government. Left unchecked, the bubbled property sector would distort the economy by suppressing much-needed consumption as people put so much of their savings into property.

Tough new measures announced in the past week have wiped out 240 billion yuan in the market value of listed developers and the damage will spread to related industries.

The head of China's banking regulator warned banks again on Tuesday against extending loans for speculative property investments and ordered all big lenders to conduct stress tests of real estate loans on a quarterly basis.

The Citigroup Inc. has predicted property prices may drop as much as 20 percent in the big cities as a result of the government clampdown, while the Shanghai-based China Business News reported record home-purchase cancellations in Guangzhou, South China.

Outside China, there are reports that Britain's government has recommended levying a new tax on lenders, and finance ministers of the G20 major developed and developing economies will convene in Washington this weekend to discuss the proposal, which is negative to the banks.

By People's Daily Online
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