Shenzhen Guang Real Estate Group, which figures among the top 100 property developers in China, is said to have been under liquidity pressure, prompting delays of several of its projects in Huizhou in Guangdong province.
The developer has refuted rumors of a potential bankruptcy, asserting that its credit lines at banks remain intact despite some liquidity pressure, the Hong Kong Economic Journal reported Thursday. The company has been in discussions with buyers regarding the delays and compensation offers, the paper said, citing information obtained from a NetEase report.
Economists believe more such incidents will occur in the second half of this year, given a relatively tight environment in China’s credit market.
The mainland property market has been cooling since the beginning of this year, forcing some developers to resort to price cuts.
A senior executive at Guang Real Estate was quoted as saying that a slew of tightening measures on the sector over the past few years have been weighing on the company. It plans to hasten its pace in project development and sales and marketing to speed up its capital flow.
A slowing economy and the central government’s policy goal to reduce excess capacity has also taken toll on other sectors.
Zhejiang Cifu Group, a renowned textile and chemical fiber enterprise in Shaoxing, is said to be overdue on its bank loans, with its total debt level exceeding 5 billion yuan (US$801.74 million), the National Business Daily reported. Agricultural Bank of China (01288.HK) and Bank of Communications (0328.HK), among 18 other lenders, are said to have extended loans to the firm.
Bank of East Asia (00023.HK) chief economist Paul Tang says a tight credit environment could see more housing developers face funding problems. The central government would however step in if there is any danger of systemic risks.
Zhu Haibin, chief China economist at JP Morgan, said local governments may also face more pressure in financing as the downturn in home prices is likely to have a ripple affect on land revenues.
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