China's major construction companies are failing to generate enough cash to meet their obligations, according to an analysis of their results, suggesting a worsening liquidity crisis in the country's real estate sector.

Net profits for construction companies fell by an average of 188% in the first six months of 2022 year-on-year, according to a report by United Overseas Bank (UOB), a Singapore-based investment bank.

According to Lusa, the UOB analyzed the results of the 32 Chinese construction companies listed on the stock exchange.

State-owned construction companies showed better results, with a year-on-year drop in profits of 27%, on average, according to the bank.

Among the 32 private builders, total cash on hand shrank by 13.8%, hurting their ability to pay debts, UOB pointed out.

CR Land, a subsidiary of one of China's largest state-owned conglomerates, China Resources Group, was the only developer to report an increase in cash on hand.

"It's an overall difficult situation. Developers have much less money to pay off debts and cannot get financing," wrote Raymond Cheng, a real estate analyst at CGS-CIMB Securities.

Last year, Chinese regulators began requiring construction companies to cap liabilities to assets ratio at 70% and to cap net debt to assets at 100%, sparking a liquidity crisis in the sector, which has been exacerbated by measures to combat covid-19.

The collapse of the Evergrande group, whose liabilities exceed Portugal's Gross Domestic Product (GDP), is the most emblematic case.

The UOB felt that without changes in central government support policies or a sudden shift in market confidence levels, more Chinese construction companies are likely to default in the near future.

The real estate crisis has strong implications for the country's middle class. Faced with a tight capital market, the sector concentrates a huge portion of the wealth of Chinese families - about 70%, according to different estimates.

This crisis also comes at a sensitive political moment. Chinese President Xi Jinping is about to assume a third term as general secretary of the Chinese Communist Party, breaking with the political tradition of the past decades.

The housing market has been contracting since July 2021.

Among the 27 Chinese construction companies listed on the Hong Kong Stock Exchange, Agile Group Holdings' earnings per share fell the most, down 59% year-on-year.

Construction companies KWG Group Holdings and China Vanke saw their earnings per share fall by more than 40% year-over-year.