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Chinese banks to cut loans to property speculators

Reuters reported that China has reiterated orders to banks to curtail lending to property developers who are speculating on rising house prices to guard against overheating in the frothy sector.

Clarifying media reports that regulators have asked banks to reduce lending to developers, a media officer at China Banking Regulatory Commission said loan restrictions should only apply to companies suspected of carrying out speculation.

The Beijing News had reported recently that Mr Liao Min who heads the Shanghai branch of the China Banking Regulatory Commission had told banks to lend less to real estate developers.

Mr Liao was also quoted as saying that banks should take property projects rather than land as collateral for loans.

Mr Hwabao Trust analyst Nie Wan in Shanghai said when developers use land as collateral and they tend to overstate the values by pledging an entire plot of land instead of the relevant parcel their projects occupy.

Concerned that record home prices may trigger a housing market bubble and destabilise the economy, China has leaned against the market in the past year.

Beijing has lifted down payments and mortgage rates, limited property purchases, launched a property tax and restricted credit to the real estate industry. Concern of a pickup in bad loans has also led banks to cut lending.