China’s Banks Safe from the Housing Bubble and China as No.1 Construction Market


Liu Mingkang, Chairman of the China Banking Regulatory Commission (CBRC), declared that Chinese banks faced little risk should a property bubble burst since only a small portion of their lending went to homebuyers.  Moreover, mortgages in China are backed by sufficient down payments and total lending volume remained limited, he said.  Last August, the CBRC demanded Chinese bank stress tests for up to a 50% fall in real estate prices in key cities.  A state bank executive commented recently that Chinese banks could withstand a 40% plunge in prices.  PBoC data indicate that new RMB denominated lending in February stood at 536 billion RMB (US$81.5 billion), lower than market estimates while M2, the broadest measure of the money supply, rose 15.7%, the smallest increase in over 2 years. 
Last year, China crossed another major milestone, surpassing the US as the world’s largest construction market with a global share of 15%, 1% ahead of the US.  A UK report forecasting trends to 2020 showed that housing construction accounted for 57% of all in China.  More important, government measures to rein in real estate and build low-cost housing are exerting a palpable effect against the housing bubble. 
Worldwide, China, India and the US will generate more than half of the growth in housing construction by 2020, which will rise 2/3 (by US$4.8 trillion) from US$7.2 trillion today.  These three countries in combination with Indonesia, Canada, Russia and Australia will account for 65% of global construction growth by the end of the decade.