(Yicai Global) March 16 -- Financial regulators in the Chinese cities of Beijing, Shanghai, Guangzhou and Shenzhen have launched measures to prevent consumer and business loans from flowing illegally into the real estate market.

Shenzhen’s financial watchdog recently met with a number of commercial banks, asking them to investigate the flow of business loan funds into property, the Economic Information Daily reported today.

The investigation covers inclusive loans of less than CNY10 million (USD1.5 million) issued after May 1 last year as well as unlimited mortgage-backed business loans in the name of individuals, the report said.

Financial institutions should reasonably control the growth rate and proportion of real estate loans, the Shanghai headquarters of the People’s Bank of China said in a document on March 12.

It also called for stronger management of personal housing loans, and a strict review of the authenticity of borrowers’ personal information. The institutions should effectively prevent consumer and business loans illegally going into real estate.

The Guangdong Banking and Insurance Regulatory Bureau also issued a similar notice a few days ago. It ordered banks to conduct a comprehensive risk assessment on business and consumer loans in terms of credit investigation, credit review and approval, post-credit management, and business cooperation with third-party institutions.

‘Illegal Access’

The Beijing Banking and Insurance Regulatory Bureau said in a statement last month that it would crack down on the illegal flow of personal credit funds into the realty market.

In addition, several banks promised to strengthen full-process control of their credit business and withdraw loans as soon as they were found to be entering the market.

Industry insiders said that some institutions or individuals claim to have access to bank loan funds, which is irregular and illegal. The relevant departments should deal seriously with suspected intermediaries, the report said.

China cut interest rates to stimulate the economy amid the Covid-19 pandemic last year, easing the overall financing environment especially for corporate and consumer borrowing. Some people have used low-interest-rate consumer and business loans to buy properties.

Take business loans for example. The interest on many banks’ mortgage-backed business loans fell below 4 percent last year, and some high-quality companies could even get rates as low as 3.65 percent, while Beijing’s housing loan rates were more than 5 percent during the same period.

Business loans also allow repayment of the principal after interest.

Editor: Peter Thomas