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Opinion
Why China must end the lucrative marriage between property and banks
Authorities are rewiring financial architecture to address the systemic risk, breaking the deep structural ties between property and banking
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Michael Han is assistant president and Shanghai general manager at Yuepu Technology Group.
Capital seeks sanctuary. In China’s property sector, however, that quest for safety had inadvertently erected a cage. The recent government takeover of Wuhan-based private lender Zhongbang Bank, expected to see a dilution of its private capital amid serious credit risks, is a calculated regulatory action. It echoes a larger and darker precedent.
A few years ago, another commercial lender, Shengjing Bank, became caught up in the Evergrande debt crisis. There was speculation property developer Evergrande leveraged its controlling stake in the bank to siphon possibly billions of dollars through opaque lending channels, effectively treating the regional lender as its private treasury. That catastrophe required a massive state-led bailout.
While Zhongbang Bank’s distress stems from its conglomerate founders being squeezed by slowing industrial supply chains and real estate-adjacent debt, both episodes ring the same systemic alarm. And they mark the beginning of a cold, structural divorce, a dismantling of the highly lucrative marriage between private corporate capital and domestic banking.
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