The central bank's Shanghai headquarters said last weekend it will intensify supervision on credit flows of both real estate developers and house buyers, the Beijing Times reported today.

This is the first time that the central bank has signaled potential risks in housing loans.

The tightening policy follows a policy signal sent by the Monetary Policy Committee under the central bank, which said recently that the sound monetary policy featuring a steady and moderate tightening should be continued according to the current condition of the economy.

As a result, in the second half of this year, real estate developers are expected to get fewer loans from lenders while some weaker developers will lapse into capital crisis. The change in asset market could also increase loan risk.

A report issued by Standard Chartered Bank also said that most Asian economies, including China, are far away from severe excessive liquidity. They are all tightening credit controls to curb inflation.

No matter what tightening measures are adopted, the cost to developers will likely rise and speculation will be restrained.

(China Daily July 31 2007)