SHANGHAI, March 18 A Chinese property developer
owing 3.5 billion yuan ($566.52 million) to banks and
individuals is teetering at the edge of insolvency, and its
owner has been detained for illegal fund-raising, domestic media
reported, citing local officials.
Zhejiang Xingrun Real Estate Co, based in Fenghua in eastern
Zhejiang province, owes 15 domestic banks 2.4 billion yuan,
state-owned China News Services reported.
The company illegally raised most of the remaining funds
from 98 individual investors, according to the report on Monday.
Private fundraising is common but illegal in China.
"As far as we know, this is the largest property developer
in recent years that is at risk of bankruptcy," wrote Zhang
Zhiwei of Nomura Securities in a research note. "We believe more
property developers will face similar pressures as transaction
volumes slow and cash flow conditions tighten."
Bankruptcies and bank loan defaults in China are common, but
the size of Zhejiang Xingrun's outstanding loans, and the fact
that the near-bankruptcy troubles follow shortly after China's
first public bond default on March 7, is likely to rattle
Calls to Zhejiang Xingrun seeking comment were not answered.
China's red-hot property market has shown signs of losing
steam since late 2013 as local governments took further
tightening measures and banks gradually tightened lending to
The March 7 bond default was followed shortly by
instructions from banking regulators to Chinese banks ordering
them to reduce lending to industries in overcapacity by 20
($1 = 6.1781 Chinese Yuan)
(Reporting by Pete Sweeney; Editing by Ryan Woo)