Caixin
Dec 01, 2020 05:24 PM
FINANCE

Real Estate Is Biggest ‘Gray Rhino’ Threat to China’s Financial System, Warns Regulator

What’s new: Chairman of the China Banking and Insurance Regulatory Commission Guo Shuqing warned again of the property sector’s potential threat to the nation’s financial stability in a recently published article.

“Real estate is the biggest ‘gray rhino’ in terms of financial risks in China at the current phase,” Guo said. Property-linked loans in China now account for 39% of total bank loans, and a large amount of capital from bond, equity and trust investments have flowed into the real estate industry, he added.

What’s the background: The comments are just the most recent example from the past few months of Guo warning about the financial risks associated with the property sector, as policymakers have been trying to curb the industry’s leverage level.

Not long after Guo’s warning (link in Chinese) about property bubbles in August, regulators drew “three red lines” with regards to the finances of the country’s 12 top real estate firms as a pilot program aimed at controlling developers’ debt. The ability of the companies to take on more borrowing will be subject to how they respond to the new financing directives, Caixin previously reported.

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full story in Chinese, click here.

Related: Regulators’ Three Red Lines on Debt Spur Property Developers to Curb Leverage

Contact reporter Guo Yingzhe (yingzheguo@caixin.com) and editor Marcus Ryder (marcusryder@caixin.com)

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