Changing China

Don’t bank on mortgage spike

By Michael Wei

Don’t count on a recent spike in home loans to greatly improve earnings at Chinese banks. That’s because they are still a relatively small part of overall lending.

“It is not expected to have a huge impact on banks’ overall earnings,” Gao Shanwen, Essence Securities’ chief economist said at the Reuters China Investment Summit, speaking about the rise in mortgage lending. Mortages make up only about 10 percent of total lending at present.

New lending in China has surged in recent months, and some of that has gone into the recovering housing market. Mortgages are considered quality loans in China because of their longer term and relatively higher margins.

Gao said that such loans are one of the key areas that commercial banks have been pushing during a lending surge in the first half of the year under a loose monetary policy.

Photo Caption: Gao Shanwen, chief economist at Essence Securities, attends the Reuters China Investment Summit in Beijing. REUTERS/Christina Hu