Chinese banks have been ramping up lending to developers in recent months, even as falling sales and weaker prices ratchet up the risk of these loans souring.
New home prices in China fell 0.9 per cent in July from June, government data showed on Monday, the third straight monthly drop. Sales volume and construction activity have also slowed as potential buyers adopt a wait-and-see approach ahead of expected further price declines.
Yet despite this weakness banks, under pressure from the government to prop up the property market, lifted lending to residential real estate developers by 26.9 per cent year-on-year in the first six months of 2014 to Rmb3.1tn. That is a marked increase over the 19.3 per cent year-on-year pace of growth in the first quarter, according to the central bank’s latest monetary policy report.