China’s economy relies heavily on the property sector, with one-fourth of its capital spending leaning towards it. This is the reason China has decided to enforce tighter rules earlier this year, including a stress test on loans given to industries – such as cement and steel – that are connected to the property market.

The stress tests, reported by the Chinese press on Friday, are meant to investigate on a bank’s ability to endure a downward trend on housing prices. Banks in seven cities – including Beijing, Shanghai, and Shenzen – are persuaded to look into the impact of a 60% plunge in housing prices. The results of their tests must be submitted before August 13 to their provincial regulator.

Analysts, though, say that one should not read too much into the results of these tests. Though the property market may weaken, it is highly unlikely to make such a dramatic fall.

There have been no official comments from the China Banking Regulatory Commission (CBRC) regarding the new stress tests. Their website, though, posted on Thursday that the hypothetical scenarios tested in the tests are not to be equated to actual property sector forecasts or policy changes. They should, as the website reiterates, be treated more as a risk management step.

The stress tests will differ from bank to bank. Each bank can decide on how the tests will be conducted according to their local real estate markets. Another thing that these banks need to do, according to CBRC, is to not extend mortgages to those buying third houses in Beijing, Shanghai, Shenzhen and Hangzhou, four of China’s booming cities.

The government is obviously not happy with the current property prices; hence the additional monetary and tax measures. A property analyst from Beijing’s Sinolink Securities says that if prices don’t drop fast enough, tighter measures may be implemented.

Industry think tank China Real Estate Association argues that this need not be the case. Chairman Zhu Zhongyi says that though sales have plummeted, price growth in key cities has declined.

Following the reports of new stress tests, real estate properties and China bank’s stocks fell.