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China suspends new brokerage investment in overheated residential property: sources
December 28, 2016 / 11:29 AM / a year ago

China suspends new brokerage investment in overheated residential property: sources

BEIJING (Reuters) - China has suspended registration of private equity asset management plans for securities and futures brokerages for cases where money is lent to property developers or to illegally fund downpayments to buy property, three sources said on Wednesday.

Residential buildings are seen in Huaibei, Anhui province, China, July 18, 2016. China Daily/via REUTERS

The new regulation applies to indirect and direct investment in residential projects in 16 major cities where house prices have soared, according to three executives of securities firms who have seen a document from the state-sponsored Asset Management Association of China (AMAC).

The number of cities may be modified and expanded based on recommendations by the housing ministry, the document said.

Existing investment by private equity investment funds in residential property is not affected by the regulation.

AMAC, the self-regulatory body that oversees private funds, stipulated that funds raised through asset management plans by brokerages must not be lent to developers to replenish cash flow and purchase land, or to illegally fund downpayments for all institutions, via entrusted loans or other means.

The industry watchdog said that the majority of such investment by brokerages in property came from banks and was concentrated in only a few hot markets.

AMAC was not immediately reachable for comment.

China’s banking regulator have previously asked lenders to step up risk management of property loans amid sharp rises in house prices that have spurred concern about price bubbles and ballooning debts.

The largest Chinese cities have taken different measures to try to cool their housing markets.

Shenzhen and Shanghai have tightened rules for listed real estate firms seeking to issue bonds, in efforts to curb excessive capital flowing into the property market.

Reporting by China Newsroom; Writing by Yawen Chen; Editing by Richard Borsuk

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