According to the China Ministry of Housing and Urban-rural Development, there will be no more loans made to developers by the country’s four biggest banks until sometime in 2011. Why? They used up their “credit quotas” in October and now will just have to wait until the New Year rolls in before they can start making loans again[1]. “Basically, we can say property loans have been stopped this year,” said an “unnamed credit department executive.”
While there certainly may be some banks who try to push the envelope on the lending bar, the executive acknowledged, those institutions will risk “verbal warnings of further penalty measures from regulators.” This new, strict control of lending likely has a great deal to do with China’s efforts to “normalize” credit after the past year’s spending on development. In fact, in light of rumors of a serious Chinese housing market bubble, Beijing has not only raised down payments and mortgage rates, but likely credit availability to developers and other borrowers will be reduced overall by about 20 percent. It is hoped that this, alone with other tightened control measures on financing, will “rein in inflation” in the country.
Already, property inflation in China has slowed since the bar went into effect, though this may be due, in part, to the government’s additional steps to curb speculation in property. Do you think that the Chinese government has the right idea, or are they exerting too much control over the real estate market?
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[1] http://www.reuters.com/article/idUSTOE6AD00N20101114
