Two construction companies have declared bankruptcy because of inability to pay debts. 50% of buildings remain unsold and Chinese banks credit crunch prostrates cash-strapped companies. State-owned industries weighed down by decrease in demand from abroad. Some shipping companies see transport almost to zero and profits decline by almost 100%.

Beijing (AsiaNews) The signs of difficulty in the Chinese economy are growing more serious, with a series of bankruptcies declared by some construction companies in Guangdong and Hangzhou. At the same time, in first quarter State owned industries profits fell by 13.6%.

Guangdong in the south, Shunde's Guangdeye Property development filed for bankruptcy two days ago because of inability to pay its debts. The private company has not built new projects since 2008, when it started having financial problems.

In Hangzhou, the Hangzhou Jinxiu Real Estate, engaged in construction of luxury apartments, has declared bankruptcy. In recent years, thanks to a loan facility of the State banks, construction companies have created projects above and beyond the real needs. According to economist Andy Xie, China now has more houses than needed. Already, the housing space per person, while serving 650 million urban residents, is higher than Europe and Japan. The amount of buildings could provide home ownership to another 200 million people, the equivalent of the increase in urban population over the next 15 years. In Beijing and Shanghai, the average price per square foot exceeds the value of five months' average wages, and according to calculations a few months ago, at least 50% of new buildings remained empty and unsold. To curb the speculative bubble, the government has imposed limits on bank lending and the purchase of second and third homes, , prostrating the cash-strapped construction companies.

Analysts expect a wave of bankruptcies in Beijing and Shanghai.

Today, data on the profit margins of state firms were circulated, which in the first quarter of 2012 decreased by 13.6%. The weak result was expected given that companies like China Cosco, maritime transport experienced a loss in profits of 98.84 in the first quarter 2012, after a total loss in 2011.

The Chinese economy is suffering because of reduced demand from abroad, but also an obsolete model of development and authority's corruption (see: 30/11/2011 As China's govt cheats, its economy is "on the brink of bankruptcy", Chinese scholar says ").

 

• china
• economy
• building
• industry
• bankruptcy
• housing
• bubble
• profit
• credit
• crunch