Mortgage And Real Estate News

Tuesday, September 2, 2014

China’s Property Market: The Risks for Banks | Pragmatic Capitalism

Despite worries about a collapse in China's property market, we think the financial system will navigate the coming credit cycle if banks can buy time to resolve loan problems—and receive government support if needed.

As we've noted, fundamentals in the property market remain strong. But what about the risks from the standpoint of banking and finance? Among China's financial institutions, banks lend the most to the property sector: by 2013, they had provided RMB9 trillion (US$1.46 trillion), compared with RMB5.4 trillion from the shadow-banking sector. For property developers, though, banks aren't the main source of liquidity. Nearly 70% of their liquidity comes from nonbank sources, 39% from their own cash and 28% from customer deposits, so they don't rely too much on bank funding.


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