Chinese banks could withstand a worst case scenario of a 50 percent drop in home prices, according to stress tests conducted by regulators, a state media report claimed.
"The worries and suspicions that China's banking industry will be dragged down by real estate developers are groundless and impossible," Liu Mingkang, chief of the China Banking Regulatory Commission, was quoted as telling broadcaster CCTV, the China Daily newspaper said on Saturday.
He said Chinese banks would survive a house price slide of anywhere between 30 percent and 50 percent.
The CBRC was commissioned in August 2010 to evaluate how Chinese banks would cope were property prices to slide.
Prices are a major source of official and consumer concern in China with apartment costs rising out of the reach of many ordinary citizens, leading to the possibility that it could spark social unrest.
Beijing has introduced a range of measures aimed at reducing prices since late 2009, such as bans on buying second homes in some cities, hiking minimum downpayments and trialling property taxes in Shanghai and Chongqing.
But officials are treading carefully as the real estate sector is a major driver of economic growth and land sales to developers are an important source of revenue for cash-strapped local governments.
The cost of new apartments in 12 out of 70 Chinese cities tracked by the National Bureau of Statistics fell in June, compared to a decline in nine cities in May, according to a statement released two weeks ago.