^{Shenzen, China}

After several years of unchecked growth, Chinese developers have run into the global credit crunch. Combined with a desire by the Chinese authorities to slow things down a little, shares in many of China’s largest listed property developers have fallen more than 50 per cent from their highs of last year in the face of investor fears that some developers might be forced into bankruptcy. The authorities have taken unusually strong measures to limit credit growth and have promised to introduce a tough new policy to reduce developers’ holdings of un built land.

Several planned share listings have been shelved, but the most worrying signals have come from the debt market. According to BNP Paribas, both China Agile Property and Greentown China have seen the spreads on credit default swaps (which allow investors to buy insurance against default) increase by over 50% in the last six months, indicating a high level of investor uncertainty.

The quantity of property transactions has dropped drastically over the last 3 months November and prices have begun to plummet – 2 cities in the south, Shenzhen and Guangzhou seeing drastic drops.

Shenzhen-based estate agents, Chuanghui (one of the major estate agents) has closed over 900 of their 1,800 branches. “We are doing our best to get cash,” says Zhang Min, a planning manager at the company’s headquarters. “We have closed many outlets and got the rental deposits back.”

Another Shenzhen-based agency, Zhongtian, closed most of its branches last November and it’s chief executive went into hiding. Southern China has been hardest hit, having seen more speculative deals than much of the rest of the country over the last two years.

Mortgages are far more common in southern China, than in the North, making the market more vulnerable to credit restrictions and slowing growth.

Eric Wong, a property analyst at UBS in Hong Kong said, “Developers with a bigger presence in the south are much more at risk.”

These recent developments are unlikely to follow too closely in the footsteps of the US market. Most analysts agree that the continued growth of the middle classes will keep demand high for the foreseeable

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