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After the bankruptcy of Xing Yun Real Estate
Company (Ningbo, Zhejiang) in March, Lide real estate
company, which is a famous company in Haining, Zhejiang, is
also facing bankruptcy issues. The money chain problem also exists
in many small real estate companies in Nanjing. Studies have
found that 90% of real estate is insolvent currently. In what
way could the small & medium real estate companies get out
of the bankruptcy dilemma?
Voice: the bankruptcy tide of real estate companies is spreading,
there are real estate companies facing bankruptcy.
The Lide real estate company is a large enterprise in Haining,
Zhejiang. It was founded in 1998. It has developed several
residential projects for more than ten years. However, Lide
could not repay its borrowing from the public on time. Many
creditors accused Lide in the court.
In fact, the company started to put its assets on sale with
reduced prices as early as 2012. There are a number of
unfinished projects, the company is bankrupt.
Lide is the epitome of numerous real estate companies in
Haining, mentioned by the local real estate sector. There are
also several local businesses facing the tight cash flow
On April. 15, SaintyMarine, a listed company in Nanjing
published an announcement that there is an overdue
entrusted bank loan fund which is not recoverable. The
principal and interest are more than 100 million yuan. The
borrower is Nanjing Fudi Real Estate Development Company.
Later, it was mentioned in many messages that the boss of
Fudi has already fled.
In early April, the money chain of Yingdi Real Estate
Company broke. The building construction of an apartment
was suspended. Sujingyayuan, a developer in North Naijing is
also facing problems.
In March, Xingrun, the largest Real Estate Company in
Fenghua, Zhejiang was seriously insolvent with total liabilities
of more than 3.5 billion yuan.
Hong Hao, a researcher at the Central University of Finance and
Economics said in his blog post that 90% of real estate
enterprises in China are involved in insolvency issues. The
debt ratios of these companies are around 150%-200%, or
Hong Hao thought that the real estate bubble will burst
whether there is central regulation or not. As long as the lack
of financial capital existed, 90% of the real estate companies
will collapse like Xing Yun.
Up to now, 33 listed real estate companies announced the first
quarter sales result. There is a marked decline within 16 of
them. It makes capital for the real estate industry tighter.
There are nearly 90,000 real estate enterprises in China in total.
How many companies will face funding problems in the future?
However, the CCP Premier Li Keqiang implied that “As long
as there is no systemic risk in one area, the government will
not interfere too much, the occurrence of some defaults is
Wu Fan, the Chief Editor of “Chinese Affairs” (a Chinese
magazine in U.S.): “They want to push all debts on to the public.
The CCP has always been the case –this case exists not
only now but for a long time. They take advantage and leave all
the bad debt to the public. They do not care whether you
starve or thirst.”
According to the estimates of Nomura, real estate
construction accounted for 16% of China’s GDP last year.
Financial Times pointed out that the sale of land and real
estate-related taxes accounted for 38% of the total income of
the CCP government in 2013. The indebted local governments
use the expensive land as the collateral for loans.
Ye Tan, a Chinese economic commentator analyzed the CCP
way to pass the real estate crisis. She said publicly: the CCP
authorities just want to undertake this great real estate bubble
by using the 50 trillion deposits from the private sector. The
burden for the government’s back –the deposits will be used to
lift the burden off the government.
Ye Tan pointed out that “To raise mortgages, then
private capital will be used by banks and local governments.
Nothing is more wonderful than this method. Housing
prices are expected to remain and the steady flow of funds
runs into the real estate industry. There will not be starvation
worries for government finance. I hope when it comes to a fall in house
prices, the worthless land was almost sold and the
bank has soft landed successfully.”
At the end of last year, according to research by “China
Enterprise Capital Alliance”, the urban housing stock reached
more than 24 billion square meters. Vacant houses
have reached 68 million units. It means that the Chinese
urban residential vacancy rate rose to 25%, which is far