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Financing Difficulties Caused 400 Chinese Real Estate Companies to Go Bankrupt

The real estate industry has been the first to bear the brunt of the Chinese government’s actions to tighten corporate finance. A mainland Chinese paper The 21st Century Business Herald quoted from court data that at least 408 real estate firms have declared bankruptcy. Guangdong province is leading the number of bankruptcies, followed by Zhejiang and Jiangsu.

At the same time, a researcher at the Guangdong Real Estate Research Association, who observes China’s real estate dynamics, said that the information mainly comes from the court’s bulletin board, and that there is room for the discussion of some data. The researcher pointed out that most of the companies that entered into bankruptcy procedures were small and medium-sized firms that had been plagued by financing problems. He also said that firms that have difficulty do not necessarily choose bankruptcy. Some will “sell the project as well as the land to large companies.” Meanwhile the Chinese government and state banks maintain a high degree of vigilance over the industry and exert tight control over the scale of housing credit. A major shock to the market will bring about systemic risks.

September and October are traditionally the peak season for the Chinese housing market. However, according to the National Bureau of Statistics, the sales price of new commercial residential buildings in 70 large and medium-sized cities increased by 8.4 percent in September. That was 0.4 percentage points lower than the increase in August. It was the smallest climb in the past year, while the housing prices have been on the rise for 48 months in a row.

Source: Central News Agency, October 30, 2019