In the latest effort to ease concerns triggered by a widening boycott of mortgage payments on unfinished houses, Chinese regulators urged banks to extend loans to qualified real estate projects and meet developers' financing needs in the case of reasonable requests, announced on Sunday (Jul 17).
China is attempting to calm the demonstrations that have broken out at 100 housing projects scattered across 50 cities and that pose a threat to the financial system by escalating the real estate crisis. State media cited analysts as saying that the stability of the financial system could be harmed if additional home purchasers follow suit. Regulators met with banks last week to discuss the boycotts.
The China Banking and Insurance Regulatory Commission (CBIRC) made its comments after an increasing number of homebuyers in China threatened to quit paying their mortgages for stalled real estate projects, worsening an economic crisis already caused by the real estate market.
Even after the CBIRC pledged on Thursday to strengthen its coordination with other regulators to "guarantee the delivery of homes," investors continued to dump Chinese banking stocks, as well as developer shares and bonds.
The CBIRC emphasized that it will help local governments in their efforts to enhance home delivery in an interview with the official China Banking and Insurance New on Sunday. It also expressed optimism that with coordinated efforts, this goal can be achieved.
In more specific terms, the regulator urged banks to "shoulder social responsibility" and actively participate in the study of plans designed to fill the funding gap, so that construction of the real estate projects that have been stalled can be resumed swiftly and homes can be delivered to homeowners in a timely fashion.
Furthermore, the report encouraged banks to improve their communication with mortgage clients as well as support the acquisition of real estate projects in order to help stabilize the property market.
The controlling agency also said there was a rise in financial risks recently in Liaoning, a province in northern China, but the risks were under control, and that the government would be taking measures to prevent any risks at China's small lenders in the future.
Despite the fact that the lenders have called the situation "controllable," concerns have persisted given the importance of the sector as a whole. It is estimated that the real estate industry accounts for about a fifth of China's gross domestic product (GDP) when you include construction, sales, and related services. The property market is also estimated to be responsible for 70% of the country's middle-class wealth.
