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Chinese banks can afford 50% drop in home prices
By Zhang Fengming |
July 29, 2011, Friday
|
Online Edition
Online Edition
Chinese banks can withstand a sharp drop in property prices of up to 50 percent as a recent stress test showed, China's top banking regulator said today.
China has run a new stress test this month and found a 30 percent or even 50 percent drop in home prices in different scenarios won't blow China's banking system with the enormity of ensuing bad loans, said Liu Mingkang, chairman of China's Banking Regulatory Commission.
Liu said the stress test doesn't mean the banking regulators' projections on home prices, but the results of the stress test will help strengthen banks' confidence to implement the tightening measures on the housing sector.
However, some economists stood out to questioning such confidence.
"I have never seen cases of any country that banks can afford real home prices drop of more than 30 percent and the country's economy doesn't end in hard landing or no banks go bankruptcy," said Lu Zhengwei, Industrial Bank's chief economist, on his microblog today.
"Static stress test can never show the real severe results of changing macro economic conditions."
China has run a new stress test this month and found a 30 percent or even 50 percent drop in home prices in different scenarios won't blow China's banking system with the enormity of ensuing bad loans, said Liu Mingkang, chairman of China's Banking Regulatory Commission.
Liu said the stress test doesn't mean the banking regulators' projections on home prices, but the results of the stress test will help strengthen banks' confidence to implement the tightening measures on the housing sector.
However, some economists stood out to questioning such confidence.
"I have never seen cases of any country that banks can afford real home prices drop of more than 30 percent and the country's economy doesn't end in hard landing or no banks go bankruptcy," said Lu Zhengwei, Industrial Bank's chief economist, on his microblog today.
"Static stress test can never show the real severe results of changing macro economic conditions."
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