China's listed real estate companies have raised over 100 billion yuan in the stock markets to date. It is the first time in the history of Shanghai and Shenzhen stock markets that a single sector has raised such a large quantity of money so fast.
The real estate companies' great thirst for fundraising comes from their desire to shake off their mass of accumulated debts. According to the People's Bank of China and the National Bureau of Statistics, real estate companies have had a debt to capital ratio of up to 70 percent on average since 2003.
Moreover, over 55 percent of their debts are bank loans. With so much money flowing into the real estate sector, Chinese banks are afraid that once the real estate market experiences swing downward, they will suffer enormous non-performing loans.
For real estate companies that plan to fundraise, issuing shares can better balance the risk and return ratio; this will become much more important in the near future.
For more details, please read the full story in Chinese. (http://www.cnstock.com/newcjzh/06cjdt/2007-08/23/content_2461418.htm)
(China.org.cn August 23 2007)
