While Bo Xilai’s fall from power has already begun to fade from the world’s headlines, it may still be bringing some unhappy news for real estate investors in the city. It seems that as part of Bo’s program of raising the profile of this municipality in southwest China, the city government may have taken on a few too many megaprojects, and it is now being forced to hustle for new capital as state-sponsored sources of funding have dried up.
According to reports in the media, Chongqing officials have reached out to Hong Kong billionaire Li Ka-shing’s Cheung Kong and Hutchison Whampoa for investment.  These officials have also reportedly approached property developer Shui On Land regarding their potential interest in buying distressed real estate projects.
This urgent hunt for new sources of financial support seems to be motivated by high levels of public debt which were taken on to help build Bo’s pet projects.
While clear figures are not available as to how much money Chongqing’s government owes, 2010 records (which are the most recent available) show that 12 of the city government’s largest investment vehicles had racked up RMB 363 billion in debt. Beyond this amount directly owed by the government, there are much large amounts of liabilities that have been taken on by state-owned firms and developers belonging to the city, as well as debt from district governments, which would make the total city debt several times higher.
City Government in Trouble from Falling Land Sales
Previously, the Chongqing city government, like most cities in China could rely on income from land sales to fund the many new  highways, and bridges that it has been building, as well as a plan to build low cost housing for two million low-income residents in the coming years.
However, as demand for new homes has fallen, developers are showing less interest in buying more land, and are paying less for it when they are interested. And now that Chongqing’s government has fallen from favour, its unlikely that they will find other ready sources of government funding.
Foreign Investors Scared Off?
In addition to problems from falling land sales, according to a report in Reuters, foreign investors may also be avoiding Chongqing.
Reuters cites sources close to Ford Motor Co and Mazda Motor Corp (both major investors in the city’s auto industry), as being concerned about a possible longer-term impact from the Bo crisis on the city’s investment climate. Also, just as Bo Xilai was getting ready for his fall from grace this March, Samsung Electronics passed on the chance to set up a new falsh-memory factory in Chongqing — opting to build this major new facility in Xi’an.
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