China’s property slump pushes financial regulator to roll out loan rule ‘trick’ to help grease the economy

National Administration of Financial Regulation lowers risk weightings for banks in measuring exposure to mortgages and equity holdings in enterprises

Regulator also lowers capital requirement for mortgages and loans to property developers after Beijing prioritised risk control and contagion prevention at a key event

Reading Time:3 minutes

China had 38.5 trillion yuan (US$5 trillion) of outstanding home mortgages at the end of September, according to the central bank. Photo: AFP

Published: 5:24pm, 3 Nov 2023Updated: 5:37pm, 3 Nov 2023

China’s financial regulator has lowered the risk weightings on property sector-related loans for commercial lenders, as Beijing attempts to walk the fine line between salvaging the sector and defusing a local government debt crisis while also serving the real economy.

The new financial regulator, the National Administration of Financial Regulation (NAFR), issued the changes on Wednesday, a day after the conclusion of the twice-a-decade central financial work conference, which prioritised risk control and contagion prevention.

The risk weightings are covered under capital base rules, which determine the minimum amount a bank must hold in relation to the risk profile of its lending activities and other assets.

At a separate meeting on Wednesday, NAFR director Li Yunze stressed serving the real economy was the “principal tenet” of China’s financial sector. He also said that risk prevention and control was the “eternal theme”, echoing a comment made by President Xi Jinping a day earlier.

Li, who was appointed party chief of China’s new financial regulator in May, also said the high-quality development of the financial market should serve China’s overall demands, in particular, technology and innovation, the green economy, inclusive financing, elderly care and the digital economy.