China blocks "hot money" speculation in property market

The State Council is asking the central bank and the banking watchdog to exercise stronger control over granting mortgage loans. There's also concern that hot money coming in across borders could further drive up prices in an already heated market. Policies are targeting those who are buy for speculation and investment.

The State Council said relevant government departments will enhance monitoring of loans and cross-border investment. This is to prevent illegal inflow of capital into the property market and to avoid the impact of overseas hot money on China's real estate market.

It called on the central bank and banking regulator to step up oversight and guidance of mortgage lending. About one-sixth of China's nearly 10 trillion yuan in new loans last year flowed into the property sector.

The State Council reiterated its stance on curbing property purposes for investment and speculation purposes. And it will also keep the minimum down payment for purchases of a second property at 40 percent.

In addition, the State Council urged local authorities to increase supply of affordable housing. And it vowed to boost land supply and accelerate construction of lower-priced, smaller housing.

Prices across 70 Chinese cities rose at the fastest pace in 16 months in November, fueling concern that record lending and inflow of overseas capital are creating asset bubbles.

The government is determined to tighten controls on residential prices in 2010. It made key changes to its real estate polices over the past month. And it's also ended some preferential policies, while continuing to increase land supply.

Earlier this week, the central bank said it will pay particularly close attention to the property market in 2010 while managing inflationary expectations.