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Chinese property developers face liquidity challenges

Finance Asia
Slowing sales and rising inventories have weakened the liquidity profiles of Chinese developers (ImagineChina)

Slowing sales and rising inventories have weakened the liquidity profiles of Chinese developers (ImagineChina)


Refinancing risk in China’s property sector has risen due to weak fundamentals and continued tight credit, with 11 of the 29 developers rated by Moody’s now facing liquidity pressure.



The liquidity profiles of China’s property developers deteriorated during the first half of 2012 and, given the subdued state of the property market on the mainland and the government’s continued tight stance on credit for the sector, any improvement is unlikely for the rest of the year.

According to the results of a stress test we conducted on May 16, weak liquidity now characterises 11 of the 29 property developers rated by Moody’s, compared to only four in our earlier test in December 2011.

The deterioration stems specifically from higher levels of short-term debt and lower-than-expected cash balances for end-2011 against the backdrop of slowing sales and rising inventories.


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