Real estate curbs choke expansion in China

The property market took off after 2000. For more than three years, authorities have been trying to cool the market by raising taxes and tightening restrictions on sales of residential property.

“They don’t want the bubble to suddenly go bust,” said Fitch’s Mr. Kong. “The government is determined to stop that trend.”

The main target has been speculative property trading, or flipping, mainly by well-off locals and outside investors from other provinces and Taiwan.

The crackdown also may be aimed at curbing rampant fraud in housing lending, reports suggest.

State-run China Central Television’s “Economic Half-Hour” program recently featured the story of a man named Fu Yongde whose identity was reportedly stolen by a property development company in order to obtain a fraudulent $138,000 loan for nonexistent property.

Still, huge inflows of investment kept the market lively until late last year.

Since then, trading volumes have dropped by nearly three-quarters compared with a year earlier, said Zhang Min, head of corporate planning at Chuanghui’s headquarters in Shenzhen.

“The government’s credit tightening has really affected the real estate market,” Mr. Zhang said. “The entire industry is in crisis.”

Mr. Zhang said his company had cut the number of outlets by 1,100 to 700 after an expansion that its chairman, Lin Fenghui, described in an online interview on Sohu.com as “too fast and too big.”

Mr. Zhang said Chuanghui was selling some branches to help weather its “temporary financial difficulty,” but denied it is facing bankruptcy.

“We are taking effective measures to solve the problem,” Mr. Zhang said. “The money customers left with us will be safe.”