Chinese banks reduce loans to development projects in smaller cities: economist

By IVCPOST Staff Reporter

Aug 21, 2013 06:50 AM EDT

A state think-tank told Reuters that banks in China had cut down on loans to property developments in smaller cities. Chief Economist Fan Jianping of the State Information Center said the reduction was due to concerns that there was already a surplus in the number of homes in these cities. Demand had also fallen in these areas as residents migrated to bigger towns in the hope of better financial opportunities. As a result, a lot of homes remained unsold.

Fan told reporters, "For many banks, when they hear that a developer wants new loans, their first concern is which city it is in. 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."

The Chief Economist also revealed that Chinese authorities were reluctant to intervene about raising demand for these properties. This is even if the surplus of unsold home had led to the creation of "ghost towns" with only very few residents.

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