Risks of loans to China's real estate sector remained controllable while the asset quality of the domestic banking sector was stable and improved last year, bankers said.

"During the process of accelerated formation of a new development pattern, it is inevitable to see clients in some sectors releasing and clearing risks. Currently, the real estate sector is undergoing fluctuations and its asset quality management faces pressure, but the sector is heading toward a virtuous circle and sound development," said Cheng Yuanguo, chief risk officer at China Construction Bank Corp, a major State-owned commercial lender.

CCB's quality of assets in the real estate sector remained relatively stable in 2021. As of Dec 31, its nonperforming loan ratio in this sector was 1.85 percent, lower than that of its corporate loans and advances, which was 2.27 percent.

In addition, its lending to key real estate companies accounted for a small part of its gross loans and advances, so the impact on its asset quality is generally controllable, Cheng said.

"China reiterated the principle that 'houses are for living in, not for speculation' at the annual Central Economic Work Conference in December. Macroeconomic regulators have introduced policies to stabilize the housing market and to strengthen risk defusing. CCB will implement the decisions and arrangements of the CPC Central Committee and the State Council, meet the reasonable financing needs in the real estate sector, step up structural adjustment and push ahead with housing rentals. In the meantime, the bank will conduct research and analysis of risks in this sector and monitor client risk to ensure that its asset quality remains stable," he said.

Agricultural Bank of China Ltd, another large State-owned commercial lender, said although its nonperforming real estate loans increased in 2021, overall risks remained under control as the bank strengthened the management of real estate loans, attaching great importance to collateral for real estate projects and the supervision of funds.

Last year, ABC stepped up credit support for the construction of affordable housing, rental housing and ordinary commercial housing, satisfied the reasonable financing needs of the real estate market, and maintained a basically stable concentration rate of real estate loans, said Cui Yong, executive vice-president of the bank.

Industrial and Commercial Bank of China Ltd saw an increase in its NPL ratio for real estate loans in 2021 mainly because its lending to a minority of high-risk clients was under the risk of being classified as NPLs. However, its loans for real estate development only took up a small proportion of total loans and will not largely affect its asset quality. At the same time, the bank made sufficient provisions which will fully cover impairment losses of these loans, said Zhang Wenwu, senior executive vice-president of ICBC.

For China CITIC Bank Corp Ltd, a Beijing-based national joint-stock commercial lender, the balance of its loans to the real estate sector dropped by 2.81 billion yuan year-on-year ($442.7 million) to 284.8 billion yuan by the end of last year.

"We have been holding a prudent attitude toward lending to the real estate sector in the past 10 years in terms of client selection. Our head office has been making decisions on which clients in this sector should be given access to loans. Among our existing real estate corporate clients, 99 percent obtained loans with collateral," said Hu Gang, vice-president of China CITIC Bank.

Among the total balance of the bank's lending to the real estate sector, loans in first- and second-tier cities accounted for more than 90 percent.

"We are still full of confidence in the real estate sector in the medium and long term as it is a backbone industry of the Chinese economy. Those real estate companies which can survive the latest round of regulatory policy adjustment and improve their assets, liabilities and management as soon as possible, will remain competitive," Hu said.