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Shuli Ren

China’s Very Distressed Developers Are Also Very Clever

Watched closely by Beijing regulators, the real estate sector has found twisty ways to pile up even more debt and avoid scrutiny.

Land and lend

Land and lend

Photographer: Qilai Shen/Bloomberg
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Wary of billion-dollar defaults, China does not want its daredevil real estate developers to take on any more debt. Banks have been asked to limit their housing loan exposure, while developers that cross the so-called “three red lines” — a trio of leverage metrics Beijing watches — are forbidden from borrowing more.

Investors are clearly worried. China Fortune Land Development Co., a mid-sized developer, saw its dollar bonds tumble to record lows Monday. How can home builders get out of their distress?