On the risk management and policy to real estate loan in China

In recent years, the real estate market in China grows fast, the amount of bank real estate loans also increase rapidly, The real estate industry has played an important role to China's economics development. However, with the increasing loan and house price, there are potential risks of bank real estate loan, it may not only affect the real estate development, but also the stability of economy. This paper analyses the current situation in bank real estate loan and reasons that cause loan increase. Quite different with other studies, the article proves that there is close relationship between local government behavior and bank real estate loan increase. The short aim and interest of local government to develop regional economy may induce banks to overvalue real estate assets and expand bank loan. Moreover, the author point out some policy suggestions to prevent real estate loan risk, they are: commercial banks should do the loan business rationally, to set up valuation system that focuses on the repayment ability; the government should pay attention to sustained local economic development and strengthen supervision on real estate market.