China's central bank announced measures to tighten property
loans on Wednesday in a further sign of concern about a property
bubble.
The People's Bank of China (PBOC) also reduced the interest rate
on banks' excess reserves in a move that analysts say is aimed at
alleviating liquidity difficulties for businesses.
Starting Thursday, commercial banks are barred from lowering
interest rates on consumer housing loans more than 0.9 percentage
points from the PBOC's benchmark rate. That raises the upper limit
of interest rates on loans longer than five years by 20 basis
points to 5.51 percent, the bank said.
It is also allowing commercial banks to raise down payments from
20 percent to 30 percent in cities where the lenders believe
property prices have been rising too fast.
"That means it has become the decision-makers' unuttered view
that there has been property bubble in some cities," said Wang
Songqi, deputy director of the Chinese Academy of Social Sciences'
Finance Research Institute. "Although the measures are only a
moderate tightening, they sent a signal to the market."
China's real estate prices have risen rapidly for more than a
year. The trend has prompted worries among some analysts and
government officials about a property bubble, although many hold
that the growing trend of urbanization is delivering substantial
support to the industry.
Real estate investment slowed last year, but the continued
uptrend in prices "needs close attention," the central bank said in
its 2004 fourth-quarter monetary policy report, released last
month.
Nine cities reported property price increases heftier than 9
percent last year, including Shanghai Municipality and Nanjing, in
east China's Jiangsu
Province.
The PBOC also announced on Wednesday its decision to reduce the
annual interest rate on excess bank reserves to 0.99 percent from
1.62 percent. Banks keep these reserves in addition to required
reserves basically to meet payment needs.
The rate cut "will help commercial banks further improve their
efficiency in fund use and liquidity management, and will promote
the liberalization of the interest rate regime," the PBOC said in a
statement.
Wang said the move is aimed more at pushing the banks to lend
more to businesses, many of which -- particularly the smaller ones
-- are feeling a liquidity crunch, partly as a result of the
ongoing macro management.
China took a slew of measures as early as the second half of
2003 to curb the rapid growth in bank loans and fixed investment,
which gave rise to worries about overheating.
"Liquidity is already on the tight side (among businesses),"
Wang said.
The central bank has scaled down its money supply growth target
for this year to 15 percent from last year's 17 percent.
The growth of broad money supply slid to 13.9 percent at the end
of February from 14.1 percent one month earlier, which some
economists worry is a bit too slow to support this year's 8 percent
economic growth target.
(China Daily March 17, 2004)