By Song Hongmei (chinadaily.com.cn)
Updated: 2007-12-14 14:52

China will rigidly control bank loans to the real estate industry for 2008 as authorities at the recent Central Economic Work Conference decided to shift from a "prudent" monetary policy, enforced for nearly a decade, to a "tighter" policy, the China Business Post reported Friday.

Government measures will include not only restricting the total loan supply to property developers and investors, but also a potential floating loan rate, the newspaper said.

The finalized plan for limiting the total amount and controlling the rates of loans to the property sector will be rolled out around the time of the Spring Festival, February 7 next year, the newspaper reported, quoting an official with the China Banking Regulatory Commission (CBRC).

The CBRC currently monitors property sector development in major cities across the country as well as the impacts on the sector of various government measures such as frequent hikes in the reserve requirement ratio.

In November, average property prices in China's 70 big- and mid-sized cities rose by 10.5 percent over the same period of last year, said Cao Changqing, director of the price department under the National Development and Reform Commission, on Thursday.

Statistics also showed that despite government efforts to curb the money supply, the bank loans for commercial estates totaled 4.62 trillion yuan ($626.76 billion) by the end of September, an increase of 29.6 percent year on year. Of the total, 1.76 trillion was lent to estate developers and 2.86 trillion to mortgage borrowers.

As a capital-intensive sector, the property market relies heavily on bank loans and its increased activity is a direct result of financial support from the banks, according to Yi Xianrong, researcher with the Chinese Academy of Social Sciences.

Zhang Tao, deputy director of the finance research department at the People's Bank of China, or the central bank, said in March that more than half of capital controlled by China's property developers came from bank loans.

However, bank loans to the property industry may drop by as much as 50 percent in 2008, said the newspaper, quoting a director of a State-owned property developer who asked to be anonymous.

Lower bank loan targets are expected in 2008, when the monetary policy is tightened, said an official with China Construction Bank, the country's top property lender.

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