Bankruptcies among Chinese developers are up by a half amid slowing economy, restrictions on borrowing

The number of Chinese property developers going out of business as they find themselves struggling to borrow money amid a slowing economy has gone up by half, according to official figures.

So far this year, 274 builders have filed for bankruptcy, a rise of 50 per cent from a year ago, according to the website of the People’s Court Daily, a state-owned publication.

A recent, high-profile example was Yinyi Group, a developer in the Chinese port city of Ningbo, which filed for bankruptcy reorganisation in June after it failed to pay back 300 million yuan in debt issued three years ago.

Although the numbers are only a tiny fraction of the estimated 100,000 developers in mainland China, concern is growing that defaults and bankruptcies will only increase. China’s economy expanded 6.2 per cent in the three months ending in June, the slowest quarterly pace since records began in 1992.

“Everyone, from home buyers to savvy investors, is worried about developers’ cash flow,” said Yan Yuejin, a research director with Shanghai-based property services firm E-House China R&D Institute.

Home builders have found it harder and harder to access their traditional sources of credit as Beijing has sought to clamp down on high debt levels.

In May, the China Banking and Insurance Regulatory Commission banned direct financing to developers who have not yet secured all the approvals necessary to start building or who have not secured all the funding they need for a project. The ban was later expanded to include indirect financing through equity investments and bond subscriptions.

And earlier this month the National Development and Reform Commission said that any new offshore bonds issued by real estate firms must be used only to replace medium- and long-term offshore debt maturing in the next year.