Hong Kong Business Tycoons Reduce Assets Holdings in Shanghai

By Li Zhen
Li Zhen
Li Zhen
August 5, 2015 Updated: August 5, 2015

HONG KONG—Hong Kong business magnates such as Li Ka-shing and Vincent Lo Hong-shui, who hold property investments in Shanghai, recently began to sell their Shanghai assets.

This is likely related to Shanghai’s current political situation. Chinese Communist Party head Xi Jinping recently took a series of actions against Shanghai as part of his campaign against his rival, former Party head Jiang Zemin. This has caused shock waves in the Shanghai officialdom and the business community.

According to a report by China state-funded news site Peng Pai, Li’s company Cheung Kong Holdings is set to sell Century Place, a major commercial complex in Shanghai, for 20 billion yuan (US$3.2 billion). In 2004, Cheung Kong Holdings bought the 360,000-square-meter prime site for 12,000 yuan per square meter with the intention of long-term holding.

Data shows that Cheung Kong Holdings sold the Oriental Financial Center to the Bank of Communications for 7.038 billion yuan (US$1.134 billion) in 2013. If Century Place is sold, Cheung Kong will have only two major pieces of commercial land left in Shanghai, which are the Westgate Mall and West Siwen Lane.

In the past three years, Li has cashed out hundreds of billions of yuan by selling assets in mainland China without making any new purchases.

Other traditional Hong Kong real estate tycoons have also reduced their property investments in the mainland, including holdings in Shanghai real estate property that have always been regarded as high-value.

On July 25, Shui On Land Limited announced that it sold Shanghai Xintiandi to The Link Real Estate Investment Trust for 6.6 billion yuan (US$1.1 billion).

Before that, the Shui On Group had already cashed out more than 10 billion yuan in mainland assets. The group sold Pudong Four Seasons Hotel and Four Seasons Place this year, with a total selling price of 1.323 billion yuan (US$213 million).

Shanghai Xintiandi is Vincent Lo Hong-shui’s landmark project in Shanghai. Lo expressed before that all their properties were available for sale except Xintiandi. However, after Shanghai Party Secretary Han Zheng was rumoured to have been removed from his post, Lo quickly disposed of the Shanghai Xintiandi office complex.

Political Climate

Jiang Zemin is based in Shanghai, and the city is considered his political “territory.” Jiang’s faction of the Party has controlled Shanghai for more than 20 years.

The Jiang faction includes a large number of officials, from the highest levels of the Party and the government to the lower district-level officials. Since Shanghai is the country’s financial center, many large state-owned enterprises have also been under the Jiang faction’s control. These combined political and economic forces in Shanghai became a stronghold of resistance to Xi’s authority.

Xi recently took a series of actions against the Shanghai group. News reports stated that Shanghai Party Secretary Han Zheng would be removed.

In addition, several other government officials have been sacked, including Shanghai Municipal Government Deputy Secretary-General Dai Haibo and Shanghai Municipal People’s Congress member Jiang Xiefu. Dai has been accused of supporting Han Zheng as well as Jiang Zemin’s son Jiang Mianheng, and Jiang Xiefu has a close relationship with Jiang Zemin’s two sons.

The business community is also facing investigation by Xi. The Shanghai Audit Bureau reported that 43 construction projects were discovered to have management irregularities involving 987 million yuan (US$159 million).

Guo Benheng, the former CEO of Bright Dairy & Food Co., Ltd., is under investigation. Bright Dairy is the company of Jiang Zemin’s close friend Wang Zongnan. The CEO of Shanghai Municipal Investment Group Corporation has also been changed.

In April, the general manager of Shanghai Chlor-Alkali Chemical Company, He Gang, and the former vice president of Shanghai Huayi (Group) Company, Li Jun, were sacked. Shanghai Chlor-Alkali Chemical is closely connected with Jiang Mianheng.

This series of anti-corruption actions taken by the authorities against Jiang Zemin’s family members and supporters indicate that Xi’s “tiger-hunting” campaign is approaching Jiang himself.

After the recent Chinese stock market disaster, the Ministry of Public Security sent a team to Shanghai to investigate. They found a few trading companies that were “alleged to manipulate the securities and futures trading,” as well as some other criminal clues.

The Securities and Futures Commission is now investigating Hundsun Technologies, Inc. and Founder Securities Company, both of which have close ties to the Jiang faction. At the same time, four Vice-Chancellors of Shanghai’s Fudan University have also been sacked from office.

Translated by Susan Wang. Written in English by Sally Appert.

Li Zhen