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Giant Chinese property developer snaps up bargains from struggling smaller builders

China's estimated 50,000 small developers who borrowed heavily last year to buy land are now suffering financial problems and unable to borrow to keep going. A growing number are either folding or seeking aid.

One property tycoon, Vincent Lo, has spent $700 million in the past year acquiring at least a dozen big real estate projects left unfinished by cash strapped developers in China.

He said there will be even more opportunities over the next year as China's commercial real estate market struggles through one of its most difficult patches in the past decade.

'Last year, when the market was hot, everyone thought they could make a pot of gold. But this year, they see that isn't true,' said Mr Lo whose latest investment company is China Central Properties. He believes it will be good for the market. 'This shaking out is going to move the industry in the right direction,' he claimed.

One of his latest projects is the Ruiqi Building, an office, luxury-apartment and retail complex in the middle of the fast-growing central Chinese city of Chongqing. CCP bought the half completed, building of approximately 925,000 square feet in July of 2007 for US $60 million. When the project goes to market in the autumn of 2009, he expects a significant profit.

In part the slowdown is the result of Beijing's efforts to rein in rapid growth, a development that has made lenders stricter. Property brokerage DTZ estimates that bank loans to the industry will fall by about 25% this year.

Meanwhile, drooping domestic stock markets have eliminated another source of funds, with the amount raised by initial public offerings for property firms down by more than 80% in the first half of this yea.

Office developer Soho China spent about half a billion dollars on distressed property in central Beijing on the cheap from a developer that was deeply in debt. It has set up a separate department to take calls from small developers trying to unload projects.

According to Charles Lam, regional managing director for Prudential Financial real estate arm Pramerica, some prime properties in key second tier cities that were unattainable last year are now available at up to 30% down from peak valuations.

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