State forming megasize real estate group
By Qing Jie (China Daily)
Updated: 2004-09-28 08:38

The central government is considering setting up a super-large, State-owned real estate group, which is also expected to be a world-leading property enterprise in terms of assets volume.

The move will optimize State-owned real estate resources, enhance the competitiveness of large property developers, and peel off non-key businesses of the enterprises to sharpen their focus on further developing key businesses, experts say.

The combined assets of the real estate group will reach 100 billion yuan (US$12.05 billion), according to an official of the State-owned Assets Supervision and Administration Commission, who did not wish to be named.

He said the new enterprise would be organized by the restructuring of existing State-owned real estate companies.

"The proposal was raised by Yang Shen, the president of the China Real Estate Association, and Gao Shangquan, president of the China Enterprise Reform and Development Research Society, and we are studying the proposal," said the official.

The commission declined to disclose the details of the proposal or the schedule of the plan.

The plan to establish the new real estate group is a part of the central government's efforts to consolidate the State-owned real estate sector.

In June, the State-owned assets commission issued an announcement saying that State-level, State-owned companies, whose key businesses are not real estate, should transfer their property business assets to the five large State-owned real estate development enterprises.

The five giants are the China State Construction Engineering Corporation, China Merchants Group, China Real Estate Development Corporation, China Poly Group Corporation and Overseas Chinese Town Group Corporation.

Companies whose key businesses are not real estate can choose any of the five conglomerates as their partners of their own accord and by bilateral negotiation.

Official statistics show that, besides the five real estate giants, most of the 191 State-level State-owned enterprises are currently operating property businesses.

The to-be transferred real estate assets are estimated at 180 billion yuan (US$21.69 billion).

Insiders say that the China Real Estate Development Corporation (CRED) will probably be the controlling firm of the new enterprise group.

Set up in 1981, the CRED is the only State-owned property group supervised by the assets commission.

CRED spokesman Han Xusheng said in August that the corporation's target was to realize an assets volume of 100 billion yuan (US$12.05 billion) by acquisitions and mergers.

The combined assets are expected to exceed 200 billion yuan (US$24.1 billion) through international co-operation with overseas developers.

"We have unique advantages, involving nationwide business networks, flexible operation mechanisms and rich experiences in real estate development," said Han.

So far, Huaneng Group has transferred its real estate assets to CRED.