Money

Bankers jittery about property market

By Li Xiang (China Daily)
Updated: 2010-10-15 10:01

A man cycles in downtown Shenzhen, Guangdong province, where many high-end properties in the city are located, along with branches of Industrial and Commercial Bank of China, and Agricultural Bank of China. Uncertainty in the property market is their biggest concern, many bankers said. [Photo/Agencies]

Survey respondents concerned about efforts to cool realty sector

BEIJING - Uncertainty in the property market remains Chinese bankers' top concern, a survey by the China Banking Association and accounting firm PricewaterhouseCoopers showed on Thursday.

About 72 percent of respondents listed the risk of a big property market correction as their top concern, and 75 percent said the housing market still faces great uncertainties.

One-third of the bankers surveyed said that they will moderately rein in property lending, while another one-third said they will strictly control the size of property development loans.

Although most respondents remained optimistic about the property market in the long run, they said it will likely decline in the short term.

The survey was based on interviews conducted between April and June with 70 senior bank executives and 752 questionnaires circulated among banking institutions across China, including head offices, and provincial and regional branches.

"Property loans account for about 20 percent of banks' overall lending," said Ba Shusong, financial institute head of the State Council's Development Research Center.

"This is not a small number, so any change in the property market will directly affect the country's banking system."

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Nearly 90 percent of survey respondents believed the regulator's credit tightening measures will increase pressure on the country's real estate industry and developers' cash flow.

Many Chinese banks reported a less-than-1-percent ratio in non-performing loans to homebuyers. But the risk of plummeting housing prices may increase the volume of such loans, a bank stress test indicated in August.

More than 70 percent of the surveyed bankers said the risks of lending to local governments may threaten the banking industry.

Nationwide, local governments' debts reached 7.66 trillion yuan ($1.15 trillion) by the end of June - 2 trillion yuan of which the banking regulator classified as "questionable", China Securities Journal reported.

"I think the risks involved with local government debts are controllable and acceptable," Ba said.

"The key is to figure out how to prevent the risks from expanding."

China's credit growth in September surprised the market with commercial banks extending 595.5 billion yuan in loans, compared to 545.2 billion yuan in August.

More than half of the bankers surveyed believed the biggest challenge for the banking industry is the regulator's reining in of loan growth and the heightened regulation of risk control.