China’s chief regulators called for banks to be wary of balance sheet exposure to the property sector, revealing figures that were significantly higher than official data.
Guo shuqing, chairman of the China Banking and Insurance Regulatory Commission (CBIRC), said that property-linked loans made up 39 percent of all bank lending in China – or about two-thirds of the nation’s GDP – according to an article he authored in a newly released book from the central government on economic planning for 2035.
This differs significantly from the official data provided by the People’s Bank of China (PBoC) which stated that the sector accounted for 28.8 percent of total bank lending, as of the end of September.
Guo is also the Communist Party chief of the PBoC.
«Grey Rhino»
Within the book, Guo called the property market China’s «biggest grey rhino risk» – a crisis risk caused by a known and unaddressed issue, in contrast to «black swan risks» which involve unknown issues.
He underlined that preventing property bubbles was key as the sector accounted for more than 100 out of the last 130 financial crises since the start of the 20th century. He also highlighted that many bonds, stocks and trust investment products were also linked to the sector, making the overall exposure dangerously high.
Banking on Bailouts?
Guo warned against reliance on government bailouts, highlighting that usage of public funds will not be lax.
«Financial institutions must try their best to rescue themselves,» Guo said, according to an «SCMP» report citing the book. «Governments won’t intervene if their risk can be solved through the market.»
Recent worries in the mainland’s property market have been emerging, most notably by real estate giant Evergrand’s debt troubles unveiled last month which was followed by a series of more debt troubles in other sectors.
