Discouraged by slumping sales, more Chinese property companies are retreating from the Shanghai, Shenzhen, or Hong Kong exchange market, adding to the number of companies delisted since last year.
On May 8, the share of Jiangsu Zhongnan Construction Group (000961. SZ), an ever-booming property company that listed on the Shenzhen Stock Exchange in March 2000, continued to fall after its share price sank below 1 yuan (14 cents) for 20 consecutive trading days—a warning indicator for delisting.
Earlier, Shanghai Shimao Co., Ltd. (600823. SH), another big real estate developer first listed on the Shanghai Stock Exchange in February 1994, retreated from the exchange market as its share fell below 1 yuan (14 cents) par value for 20 consecutive trading days and failed to rebound in the following days.
The two companies had annual sales of more than 100 billion yuan ($13.8 billion) before a sharp drop in sales in 2022. Both tried to save themselves by transferring assets and increasing executives’ stakes but ended in vain.
In addition, Country Garden (2007. HK) and other ten-plus property companies suspended trading on April 2 on the Hong Kong Stock Exchange due to a delay in releasing their 2023 annual performance report. Prolonged suspension would result in delisting.
Ups and Downs of China’s Real Estate Sector
In 2010, China Vanke (2202. HK) became the first Chinese real estate company with annual sales of 100 billion yuan ($13.8 billion). Since then, China’s real estate industry has experienced more than a decade of aggressive development, with the number of “hundred-billion-yuan real estate enterprises” gradually increasing.
By 2020, the number of such real estate companies reached a historical peak of 43, according to an article in 36kr.com, a Chinese financial media.
Since the COVID-19 outbreak and the Chinese Communist Party’s (CCP) extreme zero-COVID measures, the Chinese real estate market has suffered. Furthermore, CCP’s emphasis on the “de-speculation” of housing at the 2020 party congress and subsequent implementation of financing and mortgage restrictions weighed on the sluggish real estate sector.
Against this backdrop, the number of “hundred-billion-yuan real estate enterprises” dropped by half in 2022 and reduced to 12 in 2023.
Entering 2024, the real estate market remains grim, with sales continuing to fall. According to the latest report released by CRIC, a property research firm, in the first four months, China’s real estate market continued to slump, with sales of the top 100 real estate companies down 46.8 percent year on year.
Relaxation of Regulations
On April 30, the Political Bureau of the Central Committee proposed “digesting” excess housing supply by relaxing home purchase limits and encouraging localities to buy homes.On the same day, Beijing issued a notice allowing local households with two homes to purchase one more in the suburb. This is the first time in 13 years that the Beijing government has relaxed home-buying restrictions.
Other first-tier cities have also partially lifted purchase restrictions. Guangzhou and Tianjin now allow the purchase of housing larger than 120 square meters (1300 square feet).
On May 9, two major provincial capitals, Hangzhou City in Zhejiang Province and Xi'an City in Shaanxi Province, announced the removal of restrictions on property purchases.
Cities like Suzhou, Nanjing, Hefei, Jinan, Qingdao, Wuhan, Wuxi, Ningbo, Chengdu, and Changsha have completely lifted their restrictive policies.
Mr. Zhang also believes the real estate crisis in China is much more severe than the subprime mortgage crisis in the United States in 2008.
“The real estate crisis is triggering a financial crisis, and everyone from the Chinese government to the local people is unlikely to be immune to the fallout,” he said.
