Bei­jing’s fi­nan­cial risks up on prop­erty down­turn

New Straits Times - - Business -

BEI­JING: Moody’s In­vestors Ser­vice warns that the fi­nan­cial risks fac­ing China from a po­ten­tial prop­erty down­turn has grown as record lend­ing has made banks more risk-prone while the gov­ern­ment is less able to com­bat those risks.

China ex­tended a record 12.65 tril­lion Chi­nese yuan (RM8.13 tril­lion) of loans last year to sup­port eco­nomic growth, half of which was house­hold loans — mostly mort­gages — send­ing new home prices to five-year highs in the year.

Pol­i­cy­mak­ers now face the prospect of a nasty prop­erty mar­ket crash dam­ag­ing the econ­omy.

More large cities on China’s wealthy east coast — Fuzhou, Xi­a­men, and Hangzhou — stepped up prop­erty curbs again this week, fol­low­ing Bei­jing’s dras­tic moves that an­a­lysts say could freeze the mar­ket.

Fuzhou, Xi­a­men and Hangzhou home prices rose 23.7 per cent, 36.5 per cent and 25.4 per cent year-on-year last month, ac­cord­ing to sta­tis­tics bureau data.

Re­cent weeks have seen the big­gest wave of tight­en­ing of home pur­chase and lend­ing rules since Oc­to­ber last year, as China’s red-hot prop­erty mar­ket picked up pace in Fe­bru­ary af­ter price gains had slowed in the pre­vi­ous months.

“Pre­vi­ously, the bank­ing sec­tor’s ex­po­sure to the prop­erty mar­ket was rel­a­tively mod­est,” says Lil­lian Li, a Moody’s vi­cepres­i­dent and se­nior an­a­lyst. Reuters

AFP PIC

Volk­swa­gen will re­call more than 572,000 ve­hi­cles in China to ad­dress po­ten­tial prob­lems aris­ing from leaks in the panoramic sun­roof.

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