China clamps down on shadow banking for home downpayments

Beijing

WHEN Fu Songtao found his ideal home in the suburbs of Shanghai, he faced the typical problem of would-be homebuyers: Coming up with enough cash for a downpayment. So Mr Fu turned to an online solution. His property agent offered him a zero-interest loan, funded entirely online by peer-to-peer (P2P) lenders, that covered almost half his deposit.

"Everybody I know took out these loans," said Mr Fu, a 29-year-old employee of a state-owned enterprise, who borrowed 380,000 yuan (S$80,666) a year ago, with interest payments to lenders subsidised by the property agent, for his three million yuan apartment, and has seen its value increase to 3.3 million yuan since. "If you can borrow like that, why not?"