<P><FONT size=6>DB-中国宏观策略报告-开发商的政策风险在加强 09.26</FONT></P>
<P><FONT size=6> 26 September 2007 6页</FONT></P>
<P><FONT size=6>China Macro Strategy</FONT></P>
<P><FONT size=6>Policy risks for developers to intensify</FONT></P>
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<P>Given the recent acceleration in property price inflation (officially rising to 8.2%yoy<BR>in August; unofficially significantly higher in major cities) and the policy lessons<BR>learnt from the US subprime crisis, we believe that the Chinese government will<BR>begin to taken more concrete steps to rein in speculative demand, slow property<BR>inflation, and increase the supply of public housing. Today, local press reported<BR>that regulators (PBOC and CBRC) may raise the minimum mortgage downpayment<BR>ratios (e.g., to 40% from the current 30%) and mortgage lending rates<BR>for second home buyers. We think these policy actions are likely, and may be<BR>taken in the very near term.<BR>The minimum down-payment ratios have been raised by several banks' local<BR>branches recently, but a nationwide implementation of this policy should have<BR>broader impact on demand. An increase in mortgage lending rates will be an<BR>unexpected move, and could be more powerful than the down-payment ratio<BR>policy change as a mortgage rate hike affects all second home buyers, not just<BR>those who intend to borrow up to 70% of the value of the properties. While the<BR>market may be concerned about the ability of banks to implement these policy<BR>changes (e.g., how to identify second home buyers if they borrow from different<BR>banks and using names of different family members), we believe that policy<BR>makers will have specific arrangements to address possible loopholes. That is, for<BR>all second home buyers, as long as they are borrowing from banks (any banks),<BR>they should be impacted by these policy changes.</P>