Non-performing assets in real estate to overshadow China’s banking sector in 2018: survey
China’s State-owned asset management company has warned in a survey report that non-performing loans in the real estate and manufacturing industries may put commercial banks under pressure.

China Orient Asset Management Co., one of the top four asset management companies in China, released its China Financial Non-performing Asset Market Survey Report (2018) on Wednesday, forecasting that value of credit assets under real estate category may drop, and if housing prices in the country drop 20-30 percent, banks would be significantly burdened.

The report shows 32.8 percent of financial practitioners surveyed believe that the manufacturing sector is with the most prominent growth of non-performing assets, while 30.3 percent think the most affected should be the real estate sector. Among all the interviewed economists, 64 percent predict the size of non-performing assets would significantly grow in the real estate sector.

The survey report especially alerted the problem of non-performing assets in the housing industry. “Ever since more stringent regulations began to be imposed from April 17, 2017, nearly 250 market control policies in over 100 cities across China have been rolled out, effectively containing real estate speculation in major Chinese cities,” said the report.

China’s President Xi Jinping’s report to the 19th CPC National Congress put forward that “house is for people to live in, not for speculation”. Under the circumstances, it’s forecasted China’s housing market in 2018 would continue to face considerable pressure, with non-performing assets probably mounting.

The report said the policies may have repercussions for the whole industry chain. For example, if the housing prices drop by 20-30 percent under the policies’ influence, many sectors like construction and building materials would be affected. And ability of the banking sector for risk management may come under strain.

Most economists surveyed believe the housing prices in first, second and third-tier cities in China have bigger chance to remain stable with a slight decline in 2018, with lower-tier cities in China already under pressure of insufficient demand.

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