Only seven of the 78 state-owned firms whose core business is not real estate have pulled out of the property market despite a central government order more than eight months ago demanding that they withdraw from real estate development, China Securities Journal reported yesterday.
As a result, many commercial banks in the country have recently received a notice from the State-owned Assets Supervision and Administration Commission to suspend property development loans to the non-designated developers, according to the journal.
The SASAC said in a statement posted on its website in March that companies supervised by it whose core business is not real estate should map out plans to withdraw from the sector within 15 working days. But the commission didn't issue a specific deadline to complete the withdrawal. The companies were only told to exit the industry after their current projects are completed.
Unwilling retreat
The move aimed to curb rising real estate prices across the country because cash-flush government-backed enterprises have long been criticized for bidding up land prices to record levels and keeping smaller property firms out.
"It seems no surprise to me that it could take much more time and effort for the government-controlled firms to get rid of their real estate operations because it's natural that they are not willing to pull out from such profit-making businesses," said Shao Minghao, a research head at Shanghai Hanyu Property Consulting Co. "What makes things worse is that even if they agree to withdraw and to sell their real estate subsidiaries, there won't likely be many buyers because property development models by government-backed enterprises and private real estate companies are usually very different."
Cai Weiming, a veteran real estate analyst, told Shanghai Daily earlier that government-backed firms are flush with cash and often enjoy easier access to credit than their privately-owned counterparts due to their long and strong ties with banks.
