Wednesday, May 4, 2011

China's Citic Bank: Severe Risk in Real Estate (update)

If someone is not seeing severe risk, what are they looking at?

China Citic Bank Sees Severe Risk in Real Estate
"We especially are paying attention to risks in the funding chain for developers. We believe as tightening continuously gets stronger, the true real estate risks will appear," Shi said.

Citic Bank aims to reduce its real-estate loans this year by a third, he said. "We are being more prudent, and the risk is controllable."
The article implies this is new lending they are cutting, not their existing loan book, but it would be nice if that were clearer.

Added: Ask and ye shall receive. WSJ added this to their article:
Citic Bank aims to reduce the amount of new real-estate loans it issues this year by a third compared to last year, he said. "We are being more prudent, and the risk is controllable."

Back to the Marketwatch article:
Separately, the CBRC said Tuesday it has no plan to issue new regulations governing property trusts in May, refuting earlier reports it may impose further tightening controls on property trusts to curb risks in the real-estate sector. The regulator said it has been consistently asking trust companies to conduct property-related business while exercising proper risk management.

Many property developers have turned to property trusts for financing in the face of lending curbs and restrictions on developers' capability of raising funds from the stock market, but there has been increased regulatory scrutiny on such activity as the authorities seek to contain credit risk.

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