China’s Banking Regulator Welcomes Home Price Adjustments

(Bloomberg) -- China's chief banking regulator signaled he's comfortable with moves being seen in home prices during the industry slowdown -- as long as they aren't too extreme.

“Now there have been some adjustments in property prices, and changes in the structure of demand -- a good thing for the financial sector,” Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said at a briefing on Wednesday. “But we don't want the adjustments to be too drastic, or the impact on the economy too big.”

Home prices in China have been falling for five months as buyer confidence weakens during a liquidity crisis that rippled through the industry following a crackdown on excess borrowing. Guo's remarks signal that authorities are sticking to their line that homes are for living in, rather than speculation, even as the campaign against leverage slows the economy.

While banks were slow in granting property loans two decades ago, when it took Guo himself, then head of the nation's foreign exchange regulator, half a year to get a mortgage, “they've now come to another extreme,” prompting the regulator to warn against risk, he said.

“A lot of people borrow to buy properties for the purposes of investment, or speculation,” Guo said. “Should property prices drop or other problems emerge, it could turn into a huge financial crisis.”

Still, policy makers are treading a fine line as the housing slump takes a toll on the world's second-largest economy. Officials recently tweaked their deleveraging campaign, including by easing a year-long cap on loans to the real estate sector to fund low-cost rental housing.

Guo said China will roll out policies to provide services to the more than 300 million new urban dwellers that either don't have permanent residence or received it recently. He also said he sees room to improve housing conditions for rural residents.

Ant, Russia

Separately, Guo said Ant Group Co. and 13 other fintech platforms have yet to complete rectifications ordered by the government, but overall progress has been “smooth.” While the firms have finished their internal checks, it will take more time because it's a “very complex” process that involves issues ranging from user privacy to the protection of business secrets, he said.

China ordered a regulatory overhaul of Ant after snuffing out its $35 billion initial public offering in late 2020. The crackdown has snowballed into a broader assault on the nation's tech giants.

Guo also said the regulator doesn't support sanctions on Russia, especially unilateral ones. While the consequences of the measures need further monitoring, any financial and economic impact on China won't be huge given the resilience of the economy, he said.

“We won't participate” in such moves, he said. “We will continue to maintain normal economic and trade ties with related parties.”

With assistance from Bloomberg