China's Banking Regulatory Commission says the number of home loans in China have increased moderately. It says the pressure of home loan adjustment exists, but the risks remain controllable.
An industry rumour recently claimed China's housing prices could slump 30 percent, prompted by increasing pressure on home loans. Insiders say the pressure is rallying in the wake of the government's intensive policy measures to control the property market. China's banking regulator and major commercial banks say the pressure of home loan adjustments are still haunting the market. The risks remain huge for some local level financing platforms. The regulator is warning that the possibility of substantial risks and losses are building up. But some commercial banks remain calm.
Read more: China's Banking Regulatory Commission: Home Loans in China increased
China will be able to keep inflows of speculative capital under control even if the latest clarifications on its yuan policy trigger any influx of "hot money", a former central bank adviser has said.
The People's Bank of China, the central bank, said in a statement on Saturday that it will proceed further with the reform of the yuan exchange rate regime to enhance its rate flexibility. The move has been interpreted as the start of allowing the yuan to rise against the US dollar after it remained stable for 23 months.
On Sunday, the central bank said in a statement that it will maintain a stable exchange rate and there will be no drastic fluctuation in the value of the yuan. There will be no one-off adjustment in the value of the yuan and the fluctuation of its value must be "controllable" to prevent market forces from causing excessive swings, it said.
"The basis for large-scale appreciation of the yuan exchange rate does not exist," it said.
The People's Bank of China spoke on Saturday about the value of the yuan, with something like the oracular vagueness and market-moving power of Alan Greenspan speaking before Congress, and as often was the case with Greenspan, it is easy to read between the lines.
The announcement, which you can read in English here, means the end of nearly two years of fixing the Chinese currency to the U.S. dollar, a move that most economists, including many in China, believe is on balance good for both the world and China in the long run. It will make China the most popular attendee at next week's meeting of the G-20 nations in Canada, and it will please traders who have been betting China will allow the yuan to appreciate.
Yuan forwards headed for the biggest gain this year amid mounting calls for China to allow its currency to resume appreciation before leaders from the Group of 20 nations meet on June 26-27 in Toronto.
The US Congress may push China to revalue the yuan if the nation doesn't move on its own after the G20 summit, US House of Representatives Ways and Means Committee Chairman Sander Levin said on June 16. China's one-year swap rate rose to the highest level since October 2008 on speculation the central bank will push up borrowing costs in money markets higher to cool the economy.
"Obviously there's pressure building up on China to be more flexible on the yuan," said Gerrard Katz, head of foreign-exchange trading at Standard Chartered Plc in Hong Kong. "Now that the dollar's under pressure again and equities are up, there's going to be more hot money inflows into China."
Bonds slide
The central bank last month ordered lenders to set aside more funds as reserves for a third time this year, boosting the reserve-requirement ratio to 17 percent for the biggest banks.
The People's Bank of China, China's central bank, has decided to proceed further with the reform of the Renminbi exchange rate regime to enhance the RMB exchange rate flexibility, a spokesperson of the central bank said Saturday.
The decision was made in view of the recent economic situation and financial market developments at home and abroad, and the balance of payments (BOP) situation in China, the spokesperson said in a statement.
In further proceeding with the reform, continued emphasis would be placed to reflecting market supply and demand with reference to a basket of currencies. The exchange rate floating bands will remain the same as previously announced in the inter-bank foreign exchange market, the spokesman said.
The spokesperson said China's external trade is becoming more balanced. The ratio of current account surplus to GDP, after a notable reduction in 2009, has been declining since the beginning of 2010.
"With the BOP account moving closer to equilibrium, the basis for large-scale appreciation of the RMB exchange rate does not exist," the spokesperson said.
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