Sales in several largest cities including Beijing, Shanghai and Shenzhen, also slowed down.

For instance, in Shenzhen, the sold area of newly built commercial housing dropped by 54.38 percent to 1.7 million square meters, while the sold area fell by 27.6 percent to 8.85 million square meters in Shanghai.

House prices for the first half of this year also dropped. In Shenzhen the average price of residential housing plunged more than 40 percent to 11,000 yuan per square meter from the year before.

But industry analysts also worry that the bonds issued by real estate companies tend to be given lower ratings than those issued by other industries because factors including uncertainties resulting from government policy adjustments and changes in supply and demand affect the market.

"Given the lower ratings for issued bonds, the coupon rate will be increased accordingly, which may make real estate companies shoulder higher financing costs." says Shuai Hu at Haitong Securities.

(China Daily August 4, 2008)