As China’s housing market faces a sharp drop in sales, investors and credit rating agencies face an uphill task trying to calculate how much debt the country’s property developers actually hold.
Rising land prices in China have led to developers increasingly teaming up on construction projects in the past two years through joint ventures, with as many as six joining up to work on one development.
Under international accounting rules, unless a company holds a controlling interest in a joint venture, it can keep details of a joint venture and the debt it takes on off its balance sheet – recording instead just the amount of equity it has invested in the project.
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