Tuesday, March 29, 2011

China Warns on Property Bubble; European and U.S. Crisis Ongoing, Loose Credit Causing More Bubbles

China has warned that a property bubble could still be building up in China, and more action is needed to cool speculation.
China Banking Regulatory Commission (CRBC) has asked lenders to strictly implement rules limiting mortgages to help contain in real estate prices.

It should be noted however, than in China people do not use leverage as they did in the US during the subprime fiasco, and they pay most of the house cost upfront. That's a big difference.

CRBC adds: "There are still some irrational factors in the property market,"

"The performance of the property market has a long-term and important impact on the sound and stable development of banking industry,"

"We will implement the system of monitoring the daily average loan-to-deposit ratio on a monthly basis this year,"

It confirmed that it would rigidly control lending to financing vehicles used by local governments "to circumvent restrictions on their incurring debt, which economists warn could fuel a rise in bad loans in coming years". (Reuters)

"The clean up of local financing vehicles debts has shown initial results, but we should not relax our efforts to control later risks,"

The CBRC is also concerned about global economic prospects in 2011, due to uncertainties posed by the European debt crisis and the very loose monetary policies in certain developed countries.

"The quantitative easing policies adopted by the U.S., European countries and Japan have added more pressure to emerging market inflation and asset prices, creating uncertainties for the world economy,"
"Chinese banks have to make full preparations for future difficulties"

"The Chinese banking industry still faces some challenges in 2011, given the changing and complicated situations at home and abroad,"

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