Major Chinese Developer Insolvent; Sign Of Things To Come?

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Major Chinese Developer Insolvent; Sign Of Things To Come?
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The ongoing debate about Chinese growth, both how much of it is real and whether the government can reign it in gradually and avoid a crash, is about to be put to the test. Chinese development firm Zhejiang Xingrun Real Estate Co. is insolvent with 3.5 billion yuan ($562 million) in debt and its residential projects put on hold, Bloomberg reports, and this looks like just the beginning.

When booming GDP growth was the main priority, the Chinese government was content to allow lax lending standards to drive investment in projects that had little hope of becoming profitable. Many analysts understood that eventually the country would eventually need to replace its reliance on capital investment with increased consumption to keep GDP growth sustainable, but it never quite happened, and China’s manufacturing sector now has to compete with other Southeast Asian economies to keep exports high.

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