More Signs China's Real Estate Slumps

Real Estate Meltdown Closes In on Shanghai

BY Eric Johnson

BEIJING (TheStreet) -- A property market meltdown is spreading in cities within 100 miles of downtown Shanghai.

The latest regional cities affected by tumbling demand for new homes and commercial space are Ningbo and neighboring Fenghua, where local officials Monday formed an emergency task force following the failure of a real estate developer.

Media reports say Xing Run Real Estate Investment abandoned an unfinished complex of French-style villas in Fenghua while defaulting on about $566 million in debt, including $388 million owed to at least 10 and perhaps as many as 19 banks, including state-run China Construction Bank, one of China's largest.

The collapse is likely to ripple through the local economy, as privately held Xing Run and its chief executive Shen Caixing have close ties to construction companies in the Ningbo area, which is south of Shanghai, as well as Zhejiang University in another nearby city, Hangzhou.

The property market in Hangzhou started crumbling last month, prompting developers to slash prices on a glut of unsold apartments. Police had to be called after existing homeowners angrily stormed one developer's office, demanding compensation to make up for the sudden fall in their home values.

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