16 October 2019
Chinese authorities appear to be tightening their policy stance on property developers. Photo:
Chinese authorities appear to be tightening their policy stance on property developers. Photo:

A-share listing door seems to be closed for Chinese developers

Just when the prospect of Chinese developers raising funds through the domestic equity market seemed to be getting brighter, things took a nasty turn suddenly.

Major developer Country Garden (02007.HK) announced on Monday that it has scrapped the IPO plan of its property service unit, citing “recent policy change from Chinese regulators” as the reason.

The property giant had completed almost all the steps to spin off its unit in the A-share market. The spinoff was expected to happen within two months, according to information on the website of Shanghai Stock Exchange, before the surprise announcement that the listing plan has been killed.

Not a single property company managed to list in China since 2007. Yet in recent years, there was widespread speculation that authorities might relax the tight grip amid an IPO market reform.

A number of property developers had filed IPO applications to test the water, including names such as Beijing Capital Land (02868.HK), Guangzhou R&F Properties Co. (02777.HK) and Dalian Wanda Commercial Properties.

The initial response was quite encouraging; many property developers had been told their applications were “accepted” and “responded”, rather than being rejected outright like before.

Closely watched as a litmus test, Country Garden’s case suggests that developers’ access to the A-share market remains anything but promising.

Failure to list the service unit won’t pose much of a problem to Country Garden, which had planned to raise only 1.1 billion yuan, peanuts compared to its 500 billion yuan plus sales in the first 11 months this year, or its 120 billion yuan worth cash on hand.

However, other developers might have more to worry about the tight policy stance.

Wanda, for instance has suffered as authorities have curbed the conglomerate’s offshore buying spree by ordering Chinese banks to stop lending to the group’s overseas projects.

Now, as the domestic listing option also seems to be unavailable, Wanda will be hard pressed to seek other financing channels.

This article appeared in the Hong Kong Economic Journal on Dec 13

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist