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Last month property transactions in Chinese cities
were down 39%, a "dangerously low level."
The China Banking Regulatory Commission has yet to
release the stress test results of declined bank loans and housing prices.
Economist Qi Yanchen believes that it is because the
Banking Regulatory Commission neglects to consider the impact that
decreased bank loan volumes and housing prices would have
on collateral and other bank related businesses.
The UK "Financial Times" reported on the 22nd, "In October,
however, property transactions fell 39% year-on-year in
China』s 15 biggest cities, according to government data.
Nationwide, transactions dropped 11.6 per cent,
accelerating from a 7 per cent fall in September."
It was analyzed that, "The fall-off in transactions has
affected developers』 cash flows and, in some cases, their ability to repay bank loans."
Chinese economist Qi Yanchen Qi believes that
once the Chinese property industry falls into a depression,
related industrial chains, especially cement and steel will suffer.
Consequently, the pressure on the Chinese banks
will be overwhelmingly large.
Chinese economist Chen Qi Yan: "Cement and steel will be
the two industries suffering from the declined property values.
The operation of these two industries basically relies on
bank loans and a loose monetary policy.
Therefore, with the declined property industry,
the developers won』t be able to afford the steel, and
the cement manufacturers can not afford to pay suppliers;
which represents the pay back ability of these two branches has also declined."
International Monetary Fund (IMF) earlier conducted stress
tests of the largest 17 commercial banks and released its evaluation report on November 16.
It reported, "China confronts a steady buildup of
financial sector vulnerabilities," and "If several of these risks were to occur at the same time,
however, the banking system could be severely impacted."
IMF warned of domestic risks due to "the rise of off-balance
sheet exposures and of lending outside of the formal banking sector."
Qi Yanchen believes that the IMF report showed the
Chinese banks and financial system are increasingly vulnerable.
Qi Yanchen: "Why is the vulnerability increased?
It is because a lot of bank credit money is trapped by the real estate industry.
The finance and financing order in the Chinese society are
getting worse and may even set off a number of large-scale social incidents, (for example) usury.
The real estate market will not just get a bank loan,
but also considerable amount of private funds,
for example, the savings from you and me might
have been invested in real estate through a good friend.
Therefore, nowadays it』s not just the manufacturer of shoes
who would run away, but also the many real estate businessmen."
FT indicated, "In April the CBRC told banks to test
their loan books against a 50 per cent fall in prices, and also a 30 per cent fall in transaction volumes."
Up to now, CBRC has yet to release the results or comment.
Qi Yanchen pointed out that this is just a custom of the
opaque official economic data of the regime.
Chinese economist Qi Yanchen: "This is the managerial habit
of the Chinese government. The Chinese finance is state monopolized.
There is no such a thing as civic involvement, even though
there are many security companies, the CBRC is not capable of doing the evaluation (stress tests)."
Real estate construction shares are up 13% in China's economy,
although Beijing has been trying to curb the rising prices.
Qi Yanchen believes that China's real estate industry
is going down and the real estate bubble is bursting,
in some first-tier cities such as Beijing and Shanghai,
property prices will probably continue to fall.
NTD reporters Liang xin, Lin Ping and Wang Mingyu.
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