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People's Daily Online>>China Business

China to continue home price control

By Kang Shu (The Economic Daily)

14:45, November 29, 2011

Edited and Translated by People's Daily Online

China has made significant progress in regulating its real estate market. According to a report recently issued by the National Bureau of Statistics, housing prices fell in 34 out of 70 large and medium-sized Chinese cities in October, twice as many as in September. Home prices remained unchanged in 20 cities.

Some have suggested that the Chinese government should relax real estate controls. Otherwise declining housing prices will affect the country's financial, economic and social stability. The sales and prices of homes have both dropped, appearing to be a signal that real estate developers are probably under great financial pressure, which may bring risks to domestic commercial banks.

Experts noted that domestic banks had previously reaped massive profits when housing prices were sky-high, and are capable of coping with a modest drop in housing prices. Furthermore, the central bank has raised the reserve requirement ratio six times since the beginning of the year and expanded the coverage of the reserve requirement, which has effectively reduced market liquidity. Due to the limited lending quota, domestic commercial banks have also reduced loans to real estate developers, which reduced the risks from housing market fluctuations to a certain degree.

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