China will “strictly control” lending risks to property developers this year as the nation’s banking regulator identifies real estate as a potential flash-point for credit problems along with industries with overcapacity.
The China Banking Regulatory Commission will pay close attention to key developers and seek to curb the risk of contagion caused by possible cash shortages at some of them, according to an annual banking industry report posted on the regulator’s website today. The CBRC also said it will conduct regular stress tests and bar wealth-management products from investing in commercial property.
More-stringent bank-lending rules may raise borrowing costs for developers, which are already contending with government curbs and slowing economic growth. Property shares tumbled for six straight days through Feb. 27 after data showed price growth for new homes in China’s first-tier cities slowed in January and Industrial Bank Co. (601166) said it will delay loans for property-related projects until the end of March.
The regulator also urged banks to carry out State Council policy this year by curbing lending to industries with overcapacity and paying attention to shipyards, steel mills and photovoltaic companies, according to the report.
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