China's 4 Largest Banks to Halt Developer Loans Until Year-End

China’s four biggest state banks will not issue any new loans to property developers for the remainder of the year, the state-run China Real Estate Business reported, citing unidentified executives at the banks.

Industrial & Commercial Bank of China Ltd., China Construction Bank Corp, Bank of China Ltd. and Agricultural Bank of China Ltd., had met their allotted loan targets for the year, according to a copy of a report e-mailed to Bloomberg News by the newspaper today. Approvals of new loans had ceased since the end of October, the paper said.

Calls to each of the four banks were not answered. Bi Jianling, spokeswoman for the Ministry of Housing and Urban- rural Development, which operates the paper, said she could not confirm the story.

China’s new local-currency lending was 587.7 billion yuan ($89 billion) last month, a report from the central bank showed Nov. 11, more than the median 450 billion yuan forecast in a Bloomberg News survey of 25 economists. M2, the broadest measure of money supply, rose 19.3 percent from a year earlier, the central bank said.

China’s property prices rose at the slowest pace in 10 months in October after the government raised interest rates and expanded measures to limit the risk of asset bubbles in the world’s fastest-growing major economy. Measures to ease gains in prices included suspending mortgages for third-home purchases and a pledge to speed up trials of property taxes.

The central bank raised interest rates last month for the first time in three years and this month raised lenders’ reserve requirements as cash from October’s larger-than-forecast $27.1 billion trade surplus threatened to add to the risk of asset bubbles and accelerating inflation.

Inflation Gains

Consumer prices rose to the fastest pace in two years in October, building the case for the central bank to add to last month’s interest-rate increase. Consumer prices rose 4.4 percent from a year earlier, boosted by food costs, a statistics bureau report showed Nov. 10.

Policy makers may introduce more measures in the fourth quarter amid signs of a price recovery, according to Nomura Securities Co. The likely policies include a property tax and the enforcement of the so-called land added-value levy in the “overheated cities,” the brokerage said in a Nov. 4 report.

The introduction of a property tax may cause housing prices to drop between 15 percent and 20 percent, Citic Securities Co. said Nov. 3. The tax may affect economic growth by 0.48 to 0.64 percentage points by slowing real-estate investment, the brokerage said.

To contact the Bloomberg News staff on this story: Richard Dobson in Shanghai at rdobson4@bloomberg.net

By Bloomberg News - Nov 14, 2010 6:11 PM GMT+0800