Since last summer, the communist regime began its crackdown on China’s real estate market to restrain home speculation and debt-distressed private developers. As a result, several major private firms in the industry, including real estate giants Evergrande and Kaisa, defaulted on bonds and loans and stopped announcing earnings and monthly sale results.
Meanwhile, Chinese state-run firms could still enjoy favorable funding conditions and tacit support from the government. Several of these firms also appeared as ‘winners’ amid the property crisis.
According to Nikkei Asia on September 20, of the 31 key listed developers that announced monthly contracted sales data on September 16, only China Merchants Shekou Industrial Zone Holdings recorded positive growth in the second half of the year.
The media outlet noted that the company is a Shenzhen-listed unit of the state-backed conglomerate China Merchants Group, which belongs to less than a hundred so-called “central companies”. These are major state-owned conglomerates under the direct control of the communist regime.
Yan Changming, sector analyst at Industrial Securities, said the firm had “prominently demonstrated its advantageous financing position as a [unit of a] central company.”
In July and August contracted sales data, China Merchants Shekou logged 18% and 17% year-on-year growth, respectively.
Additionally, while the CSI 300 index declined by 9%, the company’ stock prices on September 19 spiked 44% and closed at $2.35 (16.52 yuan) from a year low of $1.64 (11.49 yuan) in mid-June.
In August, the company issued $91.5 million (635 million yuan) of onshore bonds with a coupon rate of 2.4%. This year, it has already issued $2.75 billion (19.29 billion yuan) of bonds amid most private property firms dropping out of the market.
Other two state-backed ‘winners’ were Greentown China Holdings and China Resources Land. Both of these central companies’ subsidiaries posted an increase in July sales from a year earlier.
Apart from these three state-owned developers, the remaining 28 firms saw contracted sales tumble last month. At least 14 of them reported a more than half decline in August sales over the same period last year.
Among the 36 key listed firms that have revealed their first-half earnings, 11 posted net losses and 17 recorded a double-digit fall.
Only 5 companies on the list saw a surge in sales and net profit year on year. Four are owned or supported by central or local governments, including Poly Developments and Holdings Group, China Vanke , Zhuhai Huafa Properties, and Xiamen 厦门 C&D. The last but also the only private developer in this group was Longfor Group Holdings.
According to Apollo, while private firms are battling with highly leveraged and fast-turnaround business strategies to survive in the property crisis, Chinese state-backed companies will also take the chance to increase market share and buy up more cheaper assets.
So far in 2022, Chinese state-run developers have acquired 74% of land. This compared with 40% of land before 2019.
Regarding overall China’s real estate market, unlike state-backed firms, private developers are losing and facing lawsuits from unsatisfied investors.
Nikkei Asia reported that an investor has recently filed a winding-up petition at Hong Kong’s High Court against Sunac China Holdings, one of the former leading three developers in China by sales, to claim for non-repayment of $22 million in principal and accrued interests from offshore senior notes.
The firm reported a 77% decline in July and August contracted sales following a 65% drop in the year’s first-half.
As of the end of August, Shenzhen-listed Yango Group had to face $227 million (1.6 billion yuan) worth of lawsuits from different investors in multiple courts.
The company disclosed that it fell to a $505 million (3.56 billion yuan) net loss for the first 6 months. This contrasted with a net profit of $282 million (1.99 billion yuan) from a year earlier.
Sinic Holdings Group, a medium-sized developer in Shanghai, said that a lawsuit was filed in Hong Kong last month. In terms of contracted sales, it is the worst performer with a constant over 90% monthly drop from a year ago.
In addition, property giant Evergrande said the hearing date of its winding-up petition will be on November 7.
In the worst scenario, this figure could be as high as $283.7 billion (2 trillion yuan). Therefore, he believes that Beijing’s latest rescue fund of $28.4 billion (200 billion yuan) is definitely not enough to shore up the property market in China.