State Council Tries to Crack Down on Down Payment Loans

Caixin: PBOC Orders 17 Banks to Curb Housing Loans
Several bank executives told Caixin that senior officials and lending-department managers from the 17 banks, including the state-owned "Big Five," attended the meeting, where the PBOC demanded that the banks adjust their respective lending structures, keep a tight rein on granting home loans and better manage their risks.

China's big five banks are the Industrial and Commercial Bank of China, China Construction Bank, the Bank of China, the Agricultural Bank of China and the Bank of Communications.

Sources told Caixin that regulatory authorities will take measures to keep commercial bank lending from going to the housing market, and the government will conduct more supervision and inspections of financial institutions over their issuance of home loans.

New loans in August reached 948 billion yuan ($141 billion), more than double the figure a month before, data from the People's Bank of China showed. Over 71 percent of the loans went to households.
And in July, more than 100 percent of new lending went to mortgages. In other words, if banks don't offset a cut in mortgage lending with other lending, credit creation will crater and the Chinese economy with it. Back in August I covered the situation in Depression: Residential Mortgages Account for 102pc of Lending Growth, Rate Cut Coming quoting a Chinese article:
I recently had a chat with the president of a grassroots bank, they saw the collapse of a large number of small and medium enterprises, manufacturing enterprises reluctant to borrow, demand is very weak, very worried about the outbreak of bad loans, now the only source of relief is government projects, the platform loans, he said that because in his 30 years of lending experience, the government loans never go bad, at worst they are extended, so we are all seeking to lend to government projects, and this is the reason the lending platforms have too much money, also a reason for the jump in M1.
Chinese banks want to lend to the government or for residential mortgages because these are seen as low risk. The government is telling banks to make what they see as high risk loans.

The crackdown on down payment loans isn't working:
SCMP: Underground down payment loans cast a shadow over government’s efforts to curb property lending
Chinese home buyers can still easily borrow down payments on properties, despite the government’s efforts to crackdown on the practise.

Various types of financial platforms continue to be used to allow down payment loans, which experts say is making it increasingly difficult to measure just how large a problem property debt has become.

...“There are a lot of loopholes in China’s credit system. Even though there are rules, people will break them or find ways around them,” Yi said.
So the State Council is trying to crackdown on the practice:

iFeng: 房地产金融继续收紧 国务院要求严打首付贷
October 13, the State Council issued the "Internet financial risk special work plan", requiring real estate development companies, real estate agencies and Internet practitioners financial institutions have not obtained the relevant financial qualifications, shall not use P2P network lending and equity crowdfunding platform platform in the real estate finance business; obtain the relevant financial qualification shall not be illegal in real estate finance-related businesses. Engaged in real estate finance business enterprises should comply with the relevant provisions of the macro-control policies and real estate finance management. Regulate the Internet "crowdfunding buy" and other acts prohibited various agencies to carry out " down payment loans," the nature of the business.

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