China's property rating downgraded on tightening credit

Consumer looking at property model China's strict credit policy is likely to hit new home sales, thus affecting property prices

Related Stories

Rating agency Standard & Poor's has downgraded its outlook for China's property market from stable to negative due to the country's tightening credit policy.

The agency said as credit becomes more restricted there was a possibility of a downturn in the sector.

The news comes as latest data showed that foreign direct investment (FDI) in to China slowed down in May.

Rising property prices have become a hot political issue in China.

Restrictive policy

Beijing has been trying to rein in lending in an attempt to control surging property prices.

On Tuesday, China's central bank raised the reserve requirement ratio for the banks to a record high of 21.5%, effectively reducing the amount of cash that they can lend.

Government figures also showed that Chinese banks made fewer loans in May compared to April.

The agency said that all these measure are likely to hit the sector hard.

"We're likely to see more negative rating actions in the next six to 12 months," said Standard & Poor's credit analyst Bei Fu.

"Tightened onshore credit conditions and increasingly restrictive government policy have deepened the market downturn," Ms Fu added.

Slowing investment

While authorities have been working towards restricting domestic credit, the rise in foreign investment in China has also slowed.

According to the commerce ministry, FDI was $9.2bn (£5.6bn) in May, a rise of 13.4% compared with the same month last year.

This was lower than April's 15.2% increase and less than half of March's 32.9% year-on-year surge.

More on This Story

Related Stories

The BBC is not responsible for the content of external Internet sites

More Business stories

RSS

Features

  • An undated file photo posted on 27 August 2014 by the Raqqa Media Center of the Islamic State group, showing IS fighters waving the group's flag from a damaged government fighter jet in Raqqa, Syria.Adapt or die?

    IS militants seem to be changing tactics after air strikes


  • signClean and tidy

    Things that could only happen in a Hong Kong protest


  • Child eating ice creamTooth top tips

    Experts on ways to encourage children to look after their teeth


  • Almaz cleaning floorAlmaz's prison

    Beaten and raped - the story of an African servant in Saudi Arabia


  • Train drawn by Jonathan Backhouse, 1825Original 'geeks'

    What hobby did this drawing start in 1825?


BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.