Report: China’s Banks Suspend Property Loans

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Nov. 15 – According to a report by state-run media in China, China’s four largest commercial banks have ceased issuing new loans to property developers from November.

According to China Economic Net, Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China and Bank of China have already achieved their annual allocated loan targets and will therefore suspend property loans until the beginning of 2011.

China has implemented a series of measures to cool down the property market over the past 10 months. In addition to increasing both deposit and loan interest rates, the China Banking Regulatory Commission also issued new regulations to restrict excess loan approvals from the four major banks.

The loan suspension does not come as a surprise to the market either. The one-week loan release pause initiated by the Agricultural Bank of China at the end of August already evoked concern for a regular loan release during the fourth quarter. Although the bank announced the pause as an “internal adjustment,” specialists say it shows the sign that four banks have reached the maximum limit of loan approval this year.

The suspension is not the only bad news for China’s property developers. The central bank also announced an increase in the deposit reserve interest rate by 0.5 percent on November 5, revealing its intention to implement a more prudent monetary policy, improve liquidity management, and control domestic inflation.

Although the four banks claim that they will start a new round of financing after the new year, property developers are not optimistic about 2011’s market prospects. Bank spokespeople admit that the total currency supply and the amount of loans will not see an increase next year.

According to the report by Lu Zhengwei , the chief economist for the Industrial Bank (China), loans released next year will not exceed RMB700 billion.

Industrial and Commercial Bank of China expects their loan approvals to decrease by about 20 percent in 2011.