Chinese Bankers' Concerns: Housing Market and Local Government Debt

Strategic Insights -

Chinese bankers are grappling with two significant concerns: the risk of falling housing prices and the outstanding loans to local governments via financing platforms. A survey by the China Banking Association and PricewaterhouseCoopers found that 72% of Chinese bankers believe the risk of plummeting housing prices remains their top concern. Meanwhile, 63% of respondents expressed concerns about the risks of loans to local financing companies. These concerns arise as the Chinese government has implemented tightening measures to curb the runaway housing market, and local governments have taken on significant debt through financing platforms. Despite these challenges, most respondents anticipate a bullish property market in the long run due to limited land resources and ongoing urbanization.

Key Takeaways:

  • 72% of Chinese bankers consider the risk of plummeting housing prices their top concern.
  • 63% of respondents are concerned about the risks of loans to local financing companies.
  • The majority of respondents believe housing prices will decrease in the short term but return to the upward trend in the long run due to limited land resources and urbanization.
  • 71% of China's bankers anticipate bad loans will rise in the future due to tightening measures.
  • Local governments have taken on significant debt through financing platforms.
  • Chinese bankers are concerned about the risk chain in property development loans and hot money inflows betting on the yuan's appreciation.
  • 88% of bankers said they would not expand the scale of loans to financing companies associated with local governments.
  • Individual home mortgage loans rose by 247 billion yuan in September, accounting for over 40% of overall credit expansion.
  • The Chinese government has set the annual target for new loans in 2010 at 7.5 trillion yuan.

Statistics:

  • 72% of Chinese bankers consider the risk of plummeting housing prices their top concern.
  • 63% of respondents are concerned about the risks of loans to local financing companies.
  • 71% of China's bankers anticipate bad loans will rise in the future due to tightening measures.
  • Individual home mortgage loans rose by 247 billion yuan in September.
  • Over 40% of overall credit expansion was accounted for by individual home mortgage loans in September.
  • 6.3 trillion yuan of new lending in the first three quarters of this year went to financing vehicles of local governments.
  • 7.5 trillion yuan is the annual target for new loans in 2010.
  • 84% of the planned annual lending has been pumped into the market during the first nine months of this year.

Sources:

  • "China Focus: Housing market, local government debt risks major concerns for Chinese bankers" - Xinhua, Oct 14, 2010
  • Chinese Bankers Survey Report 2010 - China Banking Association and PricewaterhouseCoopers
  • "New lending by China's banks totals 6.3 trillion yuan in first three quarters" - Xinhua, Oct 14, 2010
  • "Individual home mortgage loans rise by 247 billion yuan in September" - Xinhua, Oct 14, 2010
  • "China's central bank raises reserve requirement ratio for major lenders" - Xinhua, Oct 13, 2010
  • National Bureau of Statistics - "China's home prices rose 9.3% in August over one year ago"