Chinese banks can withstand property hit, says regulator

Chinese banks can shoulder a 50% drop in real estate prices, according to the results of the most recent stress tests, the Wall Street Journal reported. In the past two years, China’s banking regulator has ordered banks to stress-test their loans to the property sector, due to growing concerns over the health of its banks. Liu Mingkang, the chairman of the country’s banking regulator, said the tests aren’t a reflection of the regulator’s view on the Chinese property market, but that banks can continue curbs on real estate loans. To rein in rising house prices, China has introduced a variety of measures, including higher mortgage rates and limits on house purchases. Liu added that banks have allocated about US$202 billion in reserves against potential bad loans, which could cushion against declines in property prices.