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Close to 50 Percent of Real Estate Development Companies Went Out of Business in the Past Five Years

Guangming Daily recently published an article about real estate development companies. The article stated that by the end of 2013, the number of real estate development companies registered in China was 42,000, which was 36.6 percent lower than the number in 2010 and 50 percent lower than 2008. The article said that, because the current real estate market continues to be soft, most of the small to mid-size real estate development companies face serious cash flow issues. Some of them have a debit ratio close to 120 percent, while the short term liquidity ratio and total Asset Turnover are getting worse as well. In addition, the on-hand inventory level continues to grow. The article said that the only solution to the problem is to have an aggressive sales strategy and to use the income from sales revenue to pay back the debts.

Source: Guangming Daily, October 17, 2014