China Urges Banks To Avoid Housing Speculation

China has urged banks to steady the housing market and avoid speculation as fears mount that Evergrande's debt crisis could spill over into the property sector.

Saddled with more than US$300 billion in liabilities that it is struggling to repay, the Chinese property developer's potential collapse poses systemic risks for the national and global economy.

At a Wednesday meeting, the People's Bank of China (PBOC) said the country's financial sector must meet the goals of "stabilising land and housing prices" and "insist on not using real estate as a short-term economic stimulus," according to an online statement.

The central bank also stressed that "houses are used for living, not speculation".

The readout of the meeting with the banking and insurance regulatory commission did not specifically mention Shenzhen-based Evergrande. But it sends a clear signal that authorities are worried about the repercussions of Evergrande's crisis on China's property sector, which has seen months of tightening regulations intended to curb speculation.

Beijing has so far been reluctant to bail out the conglomerate, but Chinese media reported that the Shenzhen government has begun an investigation into Evergrande's investment arm.

Shenzhen's financial regulator said in a Monday letter to investors that a "thorough investigation" was being carried out after collecting information about Evergrande Wealth, Chinese media reported this week.

Evergrande has begun the process of disposing of its assets, including the sale of a US$1.5 billion stake in a Chinese regional bank to a state-owned firm.

A US$47.5 million interest payment on a US dollar bond was due Wednesday – less than a week after the property giant was due to pay another offshore bond.

It reached a deal to pay interest on a yuan-denominated note last week. (AFP)