Economy
Developers turn to Hong Kong as lending curbed
(Agencies)
Updated: 2010-05-06 17:01
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Government Credibility
Tammy Tam, a spokeswoman for Shimao, didn't respond to requests for comment by phone and e-mail. Doris Chung, a spokeswoman for China Overseas, declined to comment.
Chinese Premier Wen Jiabao's government has staked its "credibility in economic management" on measures to cool the property market, Credit Suisse Group AG said on April 29, after the state raised mortgage rates and down-payment ratios, barred lending for third homes and tightened scrutiny of developers' financing to restrain speculation. Fueled by a $586 billion stimulus package and $1.4 trillion of new loans last year, property prices jumped 11.7 percent in March.
The China Securities Regulatory Commission sent financing requests from 41 real estate companies to the Ministry of Land and Resources for review, according to a government statement on April 24. Companies with property businesses that plan to repay bank loans or boost operating capital must also submit equity financing plans to the ministry, the regulator said.
Yuan Appreciation
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"The consensus is that the yuan will appreciate against the dollar this year," said Credit Agricole's Lai. "If mainland companies borrow in Hong Kong dollars, which are pegged to the US dollar, they would be able to book currency gains and that would help their bottom line."
Policy makers in the mainland have indicated they are waiting for clearer signs of a sustained global rebound before deciding to allow gains in the yuan, which has been pegged at about 6.83 per dollar since July 2008. The Hong Kong dollar has been pegged to its US counterpart since October 1983.
New Loans
Banks in China extended 510.7 billion yuan ($74.81 billion) of new loans in March, less than the median estimate of 21 economists polled by Bloomberg News, after the central bank ordered them to set aside more reserves and urged them to pace loan growth.
China also raised mortgage rates and imposed a sales tax. Labeled "the most draconian measures on the property market in history" by Deutsche Bank AG, the moves mean developers have to pay higher deposits for land purchases while banks must suspend lending to buyers who can't provide tax returns or proof of social security contributions.
"It may be that some of the mainland banks are going to be restricted in the future" so companies "are taking pre-emptive measures to tap into the liquidity in Hong Kong," said Phil Lipton, HSBC's head of syndicated finance for Asia-Pacific debt capital markets.
