2015-03-16

Foreigners, You're Welcome to Buy Chinese Homes and Steel Mills

Premier Li Keqiang Meets the Press
Financial Times: Last year, China's real estate market has been in decline. This has prompted a large number of Chinese to start buying homes overseas. Currently, Chinese customers have become the largest group of home-buyers in New York, Sydney and London. And this has significantly driven up local home prices. Some people have called into question the legitimacy of the money spent there. Are you concerned about a backlash to such massive home-buying by the Chinese overseas? And will the Chinese government introduce new policy measures to boost the domestic real estate market this year?

Li Keqiang: China is working towards full convertibility of renminbi under capital accounts. This shows that China is taking further steps to open up its capital market. You talked about the phenomenon of a large number of Chinese buying homes overseas and said that they have become the largest home-buyers in a number of international metropolises. I suppose more evaluation needs to be done here as to whether that is true. And I'm not in possession of solid information about this. But what I know is that China is still the largest destination of foreign direct investment. And the number last year was 120 billion US dollars. At the same time, the Chinese government will continue to encourage Chinese companies and nationals to make investment and do business overseas. And in doing so, they need to abide by China's relevant laws and the laws of host countries.

You have a Westerner's face, but you speak Chinese so well. I wonder if you have bought home in China. You are welcome to do so. China is still a large developing country. Housing is not just an economic issue, but also one that concerns people's livelihood. The Chinese government needs to help the low-income people resolve housing difficulty. The government will take more steps to rebuild urban rundown areas and dilapidated homes in urban and rural areas. And the plan this year is an additional one million units each. It is the government's responsibility to meet the people's basic housing needs.

If homes aren't your thing, how about steel mills? China lifts ban on foreign control in steel industry

Back to Li's press conference:
Xinhua News Agency: Since the beginning of last year, the banks' NPL ratio has been increasing and cases of financial risks of shadow banking have occurred from time to time. Soon many local governments will see their debt come due. As the downward pressure on China's economy grows, how do you see the growing financial risks?

Li Keqiang: I see financial risks are the focus of your questions. It's true that there have been individual cases of financial risks in China, but we are fully capable of forestalling systemic and regional financial risks. China's economy continues to operate within the proper range and there is a fairly high savings rate in China. Moreover, 70% of local government debts are in the form of investment which boasts quite good prospect for yielding returns. We are also regulating the local government financing vehicles to ensure that we will keep front doors open and block back doors. Chinese banks have a fairly high capital adequacy ratio and ample provisions. It's true that there are non-performing loans and the NPL ratio has risen somewhat. Still, the level is quite low internationally.

Let me make clear here: Individual cases of financial risks will be allowed. We encourage the practice of balancing one's book in a market-based way to guard against moral hazard and raise people's awareness of financial risks. This year, we will set up the deposit insurance system and continue to develop multi-tiered capital markets to lower corporate leverage ratio. All these efforts will help ensure that financial services can better serve the real economy.

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