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The China Bubble
China Takes Baby Steps to Restrain Housing Market

The ongoing debate over China’s real estate market rages on in Beijing. Amid rising housing prices and predictions of a bubble, the Chinese authorities are seeking to restrict commercial bank lending to the housing market. Caixin Online reports:

China’s central bank summoned executives from 17 banks to its offices in western Beijing on Wednesday and demanded that they step up efforts to rein in home loans amid a nationwide property-market frenzy.

The in-person directive from the People’s Bank of China (PBOC) followed a slew of stringent measures from numerous Chinese cities aimed at curbing the housing market.

Several bank executives told Caixin that senior officials and lending-department managers from the 17 banks, including the state-owned “Big Five,” attended the meeting, where the PBOC demanded that the banks adjust their respective lending structures, keep a tight rein on granting home loans and better manage their risks.

Beijing’s actions come as real estate prices and mortgage lending continue to climb. According to official data from the People’s Bank of China, new loans in August totaled $141 billion, with 71 percent of that lending going toward households. That figure is up from 24 percent in January. In the past year, housing prices have risen by 16 percent nationwide and by much more in several of China’s biggest cities.

The Chinese government clearly views this trend with concern, and is taking initial steps to rein in lending and stabilize prices. At the same time, Beijing is telling banks not to panic. Wang Shengbang, an official from the China Banking Regulatory Commission, claimed that the banking sector has “little to worry about” when it comes to the mortgage lending business, since the real estate market has little direct effect on banks.

In all likelihood, the Chinese authorities will manage to muddle through for now with short-term fixes, and avoid the worst consequences. Any major reforms to China’s real estate market will have to wait for next autumn, when the Communist Party leadership will convene for their National Congress in Beijing.

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