The worst performing group on the Shanghai Composite Index this year are China’s property developers, and BNP Paribas says to expect the correction in Chinese real estate prices due to lending curbs and tighter money to intensify into 2011. This is the result of direct government action and it is bound to have a negative impact on the whole Chinese economy.

Private housing accounts for 13% of total investment in urban areas, and home construction accounts for 14% of all workers in urban areas, according to dailymarkets.com. Home construction also consumes around 40% of the steel and lumber produced in China.

There have been recent signs of trouble in the residential property industry. For one thing, the recent IPO of real estate consultant SYSWIN (SYSW), which sells real estate services in 17 Chinese cities including Beijing and Tianjin had to be reduced in size and in the end raised only $67.2 million.

Then, too, dailymarkets.com reports there are “Ghost Towns” in China that are still basically empty, and where development work has been stopped. In Chenggong, a city in Yunnan province, “there are more than a hundred-thousand new apartments with no occupants, lush tree-lined streets with no cars, enormous office buildings with no workers.” There are no people. Bank of America-Merrill Lynch reports that Kangbashi, west of Beijing, has only 28,000 of the planned 300,000 residents. It has run out of money.

All this strikes me as bad for the Chinese natural resource stocks, ACH, Aluminum Corp.of China; CPSL, China Precision Steel, and certainly XIN, Xinyan Real Estate Company Ltd.