Non-housing enterprises eye property market
By Liu Jie (China Daily)
Updated: 2004-07-21 09:20

A group of leading domestic enterprises, who have no real estate development experience, are actively striving to enter the property market based on their robust capital strength.

But experts and government officials said that the trend may add further fuel to the current overheating housing industry and the bold and speculative investment is risky.

Midea Group, a private household electrical appliance producer, is busy preparing for the purchase of a large property project in Guangdong Shunde.

Lenovo, one of China's top computer enterprises, plans to further expand its real estate business, while, Huawei - one of the country's leading telecom equipment providers - seeks to take over the property segment of the 999 Enterprises Group, sources closed to the two domestic conglomerates revealed.

Moreover, TCL, Skyworth and Shenzhen Electronics Group Co Ltd (SEGCL) have bought mature lands for development.

In addition, China Grains and Oils Group Corporation, Macro, Qingdao Truck, Guangzhou Liby and China Eastern Airlines commenced their real estate businesses this year.

To date, some of the projects developed by the non-housing enterprises are performing well.

However, insiders pointed out that the majority of the non-real estate enterprises' prospects in the property business are gloomy.

Li Rongrong, minister of the State-owned Assets Supervision and Administration Commission, warned that large commercial enterprises should not become blindly involved in overheated sectors with high risks, such as the property industry, on a meeting of central enterprises' leaders last December.

Insiders and experts say the large enterprises are seeking to make up for a lack of funds in the capital-intensive sector with speculation in a high-margin market.

The Chinese Government issued stricter banking loan policies on the property industry last July and the higher self-funded requirements on real estate projects were put forward later. Those pent-off measures made it difficult for a large group of real estate developers, especially medium and small-sized ones, to acquire capital.

"The large enterprises groups find out that they may gain more bargain space during the transaction with capital-thirsty property developers," said Yin Zhongli of the Chinese Academy of Social Sciences.

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