China’s State-Run Companies Rush to Liquidate Real Estate Equities

June 24, 2019 Updated: June 24, 2019

More than a dozen large state-owned enterprises in China are liquidating their equity holdings in real estate projects recently. As real estate used to be the main fuel for China’s GDP growth, as well as a main source of revenues for its state-run companies, the liquidation activities has drawn considerable attention.

According to Securities Times, a Chinese financial publication, 20 real estate projects in Beijing had equity transfers from May 1 to June 14. In comparison, there were only two equity transfers in the first four months this year.

Among the 20 real estate projects, the transferors in 15 projects are state-owned companies, including China Poly Group, Sinochem Group, Overseas Chinese Town Enterprises Co, OCT Group, Aviation Industry Corporation of China, Power Construction Corporation of China, China General Technology Group, China Electronics Corporation, China National Machinery Industry Corporation, and China Nonferrous Metal Mining Group.

The Securities Times report also revealed some details of these equity transactions. On June 12, China Jinmao, a subsidiary of Sinochem Group, transferred 28.56 percent stake in Beijing Maofeng Real Estate Co Ltd; Poly Real Estate, a subsidiary of China Poly Group, transferred 10 percent equity holdings in Beijing Jinfeng Real Estate Co Ltd. On June 17th, a subsidiary of OCT Group listed 100 percent of its equity in Jade City Co Ltd for sale.

Chinese financial scholar He Jiangbing told Radio Free Asia in a June 19 interview that these activities are an indication that the state-run companies have a pessimistic outlook for China’s real estate market.

“This shows that they heard about the plans of the top leadership before the general public does. In addition, on June 13, Guo Shuqing, the Party head of China’s central bank and chairman of the China Insurance Regulatory Commission gave a speech in Shanghai, saying that the houses are not for speculation. He also warned that there is an oversupply of housing inventory, and when the vacancy rate is too high, it can be very dangerous,” he said.

He believed that Guo’s speech indicates that the long-disputed real estate tax may become a reality in the near future.

He also pointed out that the state-run enterprises serve as the barometer for China’s real estate market, and their transaction activities could be a great reference for the public.