The China Banking and Insurance Regulatory Commission (CBIRC) has sounded an official warning against the illegal use of business loans to pay off property loans, in order to take advantage of reduced interest rates.
CBIRC said that the “conversion” of business loans into property loans had recently emerged as a lucrative area of opportunity for certain financial intermediaries in China.
“Recently, some illegal intermediaries have discovered the commercial opportunity of recommending that consumers convert property loans into business loans, and advertising the use of this loan conversion to reduce interest rates,” CBIRC said in an announcement made via its official website.
“They are tempting consumers into using the bridging funds of intermediaries to settle property loans, before obtaining business loans from banks to repay bridging funds.
“However, the operations that involve converting property loans into business loans conceal the risks of hidden legal and regulatory breaches, the trap of high fees, impacts on personal credit scores, and harm to information security.”
Since the start of the Covid pandemic, Chinese regulators have sought to improve access to funds and reduce borrowing costs for small businesses as part of an ongoing financial inclusion drive.