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PBC warns of risks in housing finance

www.chinanews.cn 2006-04-26 09:08:21

(Source: Xinhua)

Apr.26 - China's central bank, the People's Bank of China, says the real
estate industry is absorbing too much of the country's capital, causing
government attention.
"Real estate financing is making up a bigger and bigger share of the
country's financial sector. The health of real estate financing is of
critical importance to the health of the financial sector. We must pay
close attention to developments in both the real estate industry and home
financing sectors," Wu Xiaoling, deputy governor of the central bank,
told a seminar on Tuesday.
Housing prices have continued to soar, despite the government's year-long
efforts to stabilize prices and this has sparked grave concern that a
housing bubble might burst.
According to Wu, Chinese banks' lending to the real estate sector stood
at 3.07 trillion yuan (380 billion U.S. dollars) by the end of 2005,
accounting for 14.84 percent of all Renminbi lending by China's financial
institutions. This is equivalent to 16.75 percent of the country's gross
domestic product (GDP) in 2005.
The lending to individual house buyers by China's commercial banks in
2005 totaled 1.84 trillion yuan (230 billion U. S. dollars), which
account for 8.9 percent of the banks' total Renminbi lending. It is
equivalent to 10 percent of the GDP.
Wu maintained that China has established a suitable market-driven real
estate system and a bank-loan-dominated housing finance system following
two decades of reforms and experiments.
However, she said the country's housing finance system is still dogged by
many unsolved issues, such as lack of proper form of lending for
lower-income house buyers and the over-concentration of risk in the banks.
The deputy governor noted that the bursting of the housing bubbles in
Hong Kong and Japan produced a disastrous effect on their economies, and
central banks in the region have been closely watching the sector since
then.
"The central bank must accelerate its research on housing finance and
work for the healthy development of the sector," she said.

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