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Shanghai Island Shows Property Boom Promise as Debt Balloons

Property prices are booming in an island town of 60,000 people near Shanghai while the market slumps elsewhere. It comes at a cost: swelling borrowing that’s threatening local-government finances.

Tang Chunmei, a 43-year-old real estate agent in Chenjia Town, 45 kilometers (28 miles) from China’s financial hub, said average apartment prices may rise 35 percent in seven years. That contrasts with cooling nationwide, as home prices fell 0.3 percent in May in the first monthly drop since June 2012. Chenjia financed its expansion in part with a 800 million yuan ($128 million) bond sold through a financing unit last year, exceeding the town’s 120 million yuan of fiscal revenue, to build affordable apartments for farmers as rice fields are turned into tourist attractions.