BEIJING Aug 21 China's banks have reduced
lending to property projects in smaller Chinese cities due to
concerns about an excess supply of homes in those areas, the
chief economist at a state think-tank said on Wednesday.
Fan Jianping of the State Information Centre said third- and
fourth-tier Chinese cities are sitting on a large inventory of
unsold commercial homes following big land sales by local
authorities in recent years.
Small Chinese cities have been cited by analysts as focal
points for the country's property risks because their oversupply
of homes is exacerbated by falling demand, as residents migrate
to large towns in search of a better living.
"For many banks, when they hear that a developer wants new
loans, their first concern is which city it is in," Fan told
"If they hear that you are in a third- or fourth-tier city,
even if you are Country Garden, China Vanke
, Wanda Group or other big firms, banks are still
very cautious and will be reluctant to give you the money," he
When asked if China's government would intervene to raise
demand for homes in small cities, Fan said authorities are loath
to do so even though the glut of unsold houses have created
"ghost towns" that have few residents.
There's no data on how many "ghost towns" exist, but several
have gotten media and public attention, particularly Erdos in
The Chinese government has intervened heavily in the
country's frothy real estate market for nearly four years in an
attempt to cool prices. It has restricted the number of homes
families can buy and tightened funding for developers.
But despite the controls, China's property prices are still
hitting record levels. Data last week showed new home prices
rose 7.5 percent in July on an annual basis, the sharpest rise
China's official property data does not have comprehensive
price information on small cities, though three cities recently
cited by data provider China Real Estate Information Corp as
danger zones saw annual price gains of 7 percent in July.
The three were Ganzhou in the eastern province of Jiangxi,
Nanchong in Jiangsu, another eastern province, and Zunyi in
Guizhou in southwestern China.
(Reporting by Koh Gui Qing and Shao Xiaoyi; Editing by Richard