The Chinese government is continuing its efforts to take control of the overheating property sector in a sign that it sees continuing pressure on the wider economy.
The latest policy move, the third in 10 days, comes as the government mains an optimistic assessment of the economy for 2010 (see separate story).
So far the moves have had a bigger impact on the sharemarket where there’s been an estimated $US40 billion-plus slump in the value of the major listed property groups.
The crackdown has pushed the overall market down more than 9% so far in 2010.
The latest government policy move sees a tightening on the activities of listed companies with an involvement in the sector.
It effectively places all big corporate property developments by listed groups under official control, before they happen.
A total of 41 listed property groups are to have their investment plans checked by the Government.
It adds to the controls already tightened on bank loans for companies and local and national government bodies.
This time it is requiring developers to submit fund-raising plans for review.
It continues the series of policy changes to slow the overheated property (especially housing) sector by cracking down on speculation by individuals, banks, private companies and government organisations.
It has also tightened the tax on property profits, lifted the amounts required for deposits, urged banks to review all loans, especially on second and third homes and on developments and to re-price their loans wherever needed
The central bank has said it will be conducting audits of all bank lending books in the third quarter to see if the new rules have been followed.
The absolute level of lending has been slashed and banks have been directed to lend into greener industries instead of property or old polluting industries, or to western regions of the country.
Corporate real estate investors who plan to invest equity in projects are subject to the latest reviews, while companies with real estate business planning to re-pay back bank loans or boosting operating capital will also have to submit any equity financing plans to the ministry.
The latest rules were issued by China’s share market and securities regulator, which adds to the pressure on corporates from the moves by the central bank and the various departments overseeing the property sector.
The Ministry of Land and Resources will advise the securities regulator about the details, after reviewing whether land purchases were made legally and whether there are cases of real estate being left idle and changes in the use of properties.
The continuing tightening of controls on the property sector has contributed to the weakness in the Chinese sharemarkets.
The key Shanghai Composite is down 9% this year, while the economy grew at 12% and the property index in Shanghai has fallen 18%, wiping out $US40 billion or more since late February, according to market commentators.
