China acts to prevent business loans flowing into property market

Chinese authorities moved to tighten the regulation of business loans to prevent them from illegally flowing into the property market.

Banking financial institutions should be stricter on verifying the qualifications of business-loan borrowers, according to a document jointly issued on March 26 by the China Banking and Insurance Regulatory Commission, the Ministry of Housing and Urban-Rural Development and the People's Bank of China.

Enterprises without any actual business should not be granted business loans, while new enterprises that have been established or received equity rights for less than a year, as well as borrowers who have been in possession of a mortgaged property for less than a year, should undergo more stringent examination, the document said.

Banking financial institutions are instructed to enhance investigations into the purposes of business loans, especially with borrowers who applied shortly after they concluded real-estate transactions.

The document called for boosting management during and after the loan services and strengthening the monitoring of post-loan capital flows.

Business loans will be withdrawn immediately if they are found to have been used in the property market, and the borrowers will face reduced credit lines and be investigated for legal responsibilities, it said.

Local authorities will carry out a special investigation into the illegal inflow of business loans into the property market before the end of May, and greater efforts will be made to rectify and punish the irregularities, according to the document.