China CITIC Bank: China's real estate market contains huge risks

Citic Bank Co., Ltd. (China Citic Bank Co.) issued a warning on the huge risk posed by China's real estate market this year and said it plans to cut credit in the real estate sector. This shows that the banking industry may have begun to feel the impact of the government's real estate market control measures.

Shi Yuan, general manager of Risk Management Department of China CITIC Bank, said in a quarterly conference call that China CITIC Bank relatively clearly saw the huge risks in the real estate market this year. He said that Premier Wen Jiabao of the State Council has repeatedly stressed the importance of continuing to regulate and control the real estate market, such as the implementation of home purchase restrictions and raising the minimum down payment ratio.

At present, there are many signs that the government's house price control measures have achieved more results, and some people worry that the drop in house prices may bring pressure on the banking industry.

Shi Yuan said that China CITIC Bank pays special attention to the risks of the real estate developer's capital chain, and believes that as the intensity of control measures continues to increase, real risks in the real estate market will emerge.

He said that China CITIC Bank plans to reduce the increase in real estate loans this year by one-third, and CITIC has adopted a more cautious attitude. This risk is controllable.

There are signs that the government's regulatory measures are having an impact. Vanke [Introduction] The China Vanke Co., Ltd. (referred to as Vanke A) said on Tuesday that property sales in April increased by 1.3% year-on-year to RMB 7.9 billion, an increase far below that in March. 47.8%.

Tan Huajie, the secretary of Vanke A's board of directors, said in a Tuesday announcement that the regulation has had a significant impact on the market and the transaction rate has generally slowed. With the continued listing of new supply, the industry's inventory pressure will further increase.

According to an unnamed source close to China's Ministry of Housing and Urban-Rural Development (abbreviation: Ministry of Housing and Urban-Rural Development) on Wednesday, Shanghai Securities Journal reported that China may expand the scope of real estate purchase restrictions to prevent the flow of speculative capital. Fourth-tier cities. The report quoted the person as saying that China may promote Beijing's implementation of real estate control measures to other cities.

Chinese officials have repeatedly expressed concerns about housing prices, because despite the recent decline in the real estate market volume, house prices remain high. According to reports from the Xinhua News Agency, Premier Wen Jiabao and State President Hu Jintao respectively stated at the weekend that the determination of the central government to reduce excessively high house prices remains firm.

The China Banking Regulatory Commission (abbreviation: China Banking Regulatory Commission) said last month that it has asked banks to conduct a new round of stress tests on real estate loans and stepped up efforts to prevent credit risks. However, the China Banking Regulatory Commission said that the scenario assumption of the new round of bank loan stress tests does not represent the judgment of the real estate market trend. Zhao Qingmin, assistant to the chairman of the China Banking Regulatory Commission, said in March that a previous stress test showed that the bottom line figure of real estate regulation and control on bank bad debt pressure was 30%.

The National Bureau of Statistics of China announced last month that of the 70 large and medium-sized cities in March, there were 49 cities with newly-increased prices for commercial housing, and there were 56 cities and 60 cities in February and January respectively.

In addition, the China Banking Regulatory Commission said on Tuesday that it has no plan to issue new regulations on real estate trusts in May, thus refuting previous reports that the China Banking Regulatory Commission may further tighten its real estate trusts to control the risks in the real estate market. According to the China Banking Regulatory Commission, trust institutions have been required to implement sound risk management while conducting real estate-related business.

Due to the constraints of credit control and the ability to finance from the stock market, many real estate developers turned to real estate trusts for financing. However, as regulators are trying to control credit risk, such financing activities have been more scrutinized by regulators.

Wang Kang, general manager of the Planning and Finance Department of China CITIC Bank, said on Wednesday that China CITIC Bank cannot continue to replenish capital in the medium to long term, but the new regulations on capital adequacy ratio issued by the China Banking Regulatory Commission on Tuesday will not affect CITIC Bank in the short term.

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