DEVELOPERS in China, the country’s most leveraged sector, have finally got their rising debt piles under control and some even boast record amounts of cash, powered by strong earnings growth and restrained expansion, a Reuters analysis showed.

That should be a relief to investors worried about potential corporate defaults as China faces a record US$1.5 trillion of corporate bonds maturing in the next two years.

But it is also a warning sign that the country’s buoyant property market is slowing down, with policy uncertainty keeping developers jittery and delaying investment.

“The amount of cash is high, because they have held back acquisitions and construction expenditures. They have to replenish their pipelines of projects going forward,” said Phillip Zhong, senior equity analyst at Morningstar.

“The protection [against default risks] is higher due to lower inventory in the system and developers can easily deleverage if they slow down the land acquisition,” said John Lam, head of Hong Kong and China real estate research at UBS.

A Reuters analysis of 45 Hong Kong-listed mainland developers’ balance sheets showed their combined cash and short-term investments rose to a record 1.1 trillion yuan (US$14.5 billion) at the end of 2018, while net debt-to-core earnings ratio fell to 5.14 percent, the lowest in four years.

Another analysis of 50 developers listed on mainland exchanges showed their average debt-to-equity ratio fell to 1.73 at the end of March quarter, the lowest since 2013.

China’s land sales by value rebounded 6 percent in the first four months of this year, according to real estate researcher CREIS.(SD-Agencies)