China’s banks should step up funding for property developers to reduce the risk of additional defaults and ensure completion of housing projects, members of the country’s top lawmaking body said.
Increasing funding would ease “panicked expectations” of households, said members of the standing committee of the National People’s Congress, China’s Communist Party controlled parliament.
The comments were made last month at a meeting where central bank head Pan Gongsheng presented a report to parliament that called for more support for big real estate.
Regulators have since circulated a list of 50 property developers eligible for a range of financing support in the latest official attempt to stabilize the country’s real estate market after a slump lasting over two years.
Read more: China Puts Country Garden on Draft List of Builders to Support
The publication on Wednesday of the comments by standing committee members, who have nominal oversight of the PBOC under the guidance of the Communist Party’s leadership, highlights the central bank’s push to step up support for the property market.
The lawmakers also made several technical criticisms of Chinese financial and monetary policy implementation.
Financial sector profits have room to fall as a share of the economy, the lawmakers said, stating that earnings were higher than the average in the OECD group of nations. China has been guiding banks to refinance loans to local governments at lower rates, and drop their net interest margins to support the economy.
“There is still a lot of room for the financial industry to transfer profits to the real economy,” the lawmakers said, according to a readout of the meeting posted on the government website.
An increase in corporate sector leverage relative to gross domestic profit hasn’t translated into a strong increase in investment, the lawmakers said.
“Monetary funds are idling between banks, or between banks and large enterprises, and credit funding channels for small and medium-sized enterprises are not smooth,” they said.
The lawmakers also called for stronger efforts against corruption related to the sector. When real estate defaults occur, officials should look into the possibility of related corruption in the financial sector, some of the lawmakers said.
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