China's property glut is weighing heavily on the economy

A construction project that started in 2009 on the Venice Impression in Anyang, Henan province has now come to a halt, costing many creditors their investments. Yang Qinghe, head of Chaoyue Group, a developer and local coal-property conglomerate, was arrested in November on criminal charges of "illegally fund-raising", apparently leaving debt of ¥4bn. However, the Venice Impression is not the only project to fall apart, several Chinese cities and towns are also suffering from an oversupply of property, which is weighing on the nationwide property market and economy as a whole. “China property investment will see a decline of 2% to 3% next year – the first property investment fall on record,” said Zhu Haibin, chief China economist for JPMorgan. Although, on the other hand, Beijing and Shenzhen's property prices are rising due to the limited supply of new homes.  

The Chinese economy has a long history of proving its doubters wrong. But a growing number of experts are wondering whether this time the doubters might be on to something. Beijing’s goal for 2016 is to keep growth ticking over at around 6.5 per cent but four issues, like horsemen of an economic apocalypse, are threatening those plans: industrial overcapacity, heavy business taxes, sky-high property inventories and financial risks. We examine each threat in a four-part series that starts today. Zhou Xin explores the real estate ambitions that have fallen to ruin in Anyang, Henan province.