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PROPERTY

Funding Tap Runs Dry for Property Developers

By Zhang Xin, Han Yi, Liu Xiao and Pan Che
It has grown increasingly difficult for China's real estate developers to take on debt this year as they find themselves squeezed by government curbs on bank lending and a regulatory campaign to force the financial sector to deleverage and improve risk controls.  Photo: IC
It has grown increasingly difficult for China's real estate developers to take on debt this year as they find themselves squeezed by government curbs on bank lending and a regulatory campaign to force the financial sector to deleverage and improve risk controls. Photo: IC

(Beijing) — Debt is the lifeblood of Chinese real estate developers. Until they can refill their coffers with cash from property sales, they need money to fund their operations, such as buying raw materials, paying workers, paying government fees and, most important of all, buying land.

But this lifeblood is being slowly drained as developers find themselves squeezed by government curbs on bank lending that aim to deflate the housing bubble, as well as a regulatory campaign to force the financial sector to deleverage and improve risk controls. One by one, regulators have restricted the sources of funding available to builders — bond issuances, private equity and bank lending. Now, with even the costliest and riskiest form of borrowing — via trust companies — under scrutiny, companies are running out of options.

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