China;Deep in Debt, Builders Risk Bankruptcy-Another Sign That The Wheels Are Beginning To Fall Off?

As credit tightens in China, real estate is feeling the pinch, and the debts of builders are going up. The combined debt of 106 listed companies was over one trillion yuan in the first half of 2011, according to Hong Kong media reports.

According to China’s National Bureau of Statistics, from January to August unsold inventory and unoccupied properties increased by 14.1 percent. A lot of money is wrapped up in these investments, and developers aren’t happy.

Liu Yuan, manager of Centraline China Property Research, said that the shrinking money market has made mortgages hard to obtain. As sales continue to drop, medium and small corporations are finding it hard to obtain loans from banks. If it continues in this manner, he said, bankruptcies will be hard to avoid in second and third tier cities towards the end of the year.

According to a “Sounds of Finance” report, during the first half of 2011, listed real estate companies’ asset to liability ratio reached 72 percent, and total debts exceeded 1.09 trillion—a 41 percent increase over the same time last year.

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