New Financial Perspective Helping Create 4 New Magnates of China's Real Estate Industry

BEIJING, March 27, 2012 /PRNewswire-Asia/ -- More than a decade ago, when China's real estate industry embarked upon unbridled growth, the financial industry strung along with it by indulging nearly all its requests. That was when the two industries were in their first honeymoon. However, with the gradual market expansion and polarization of the business conditions of the enterprises, especially under the impact of policy-related uncertainty, the risks on the capital market have increased and banks no longer give the green light to all real estate players indiscriminately. Instead, they have begun to tighten the money supply. An original report from Sina Leju follows:

Given the changes in the overall pattern of the real estate industry and effect of "survival of the fittest", the financial industry has started to screen the enterprises and select only those with outstanding performance and highly secure financial position for a second honeymoon. In such a new situation, Wanke, Evergrande, Zhonghai and Baoli, the extra-large real estate enterprises, have won strong support from domestic banks to become the 4 new magnates of the industry.

It is an iron law in bank operations that capital always seeks profits. In fact, the premier factor causing the real estate industry to become a favorite of banks is still its scale. The banking industry obviously uses this as a criterion in selecting the key enterprises that it will foster. Insiders generally believe that sales volume is a direct reflection of scale and also the most important indicator for measuring development level and comprehensive strength. This has turned Wanke into a target of hot pursuit and differentiated Baoli and Zhonghai from other central enterprises. Now, Evergrande has managed to squeeze in.

Recently, this report learnt that a number of banks had included Evergrande into the customers under the direct control of their head office and core customers in spite of the situation of tight control this year, thus giving it the same treatment as that given to large central enterprises like Zhonghai and Baoli. This signal shows that real estate enterprises of strong development momentum are still highly accepted by the financial industry under the background of the property market regulation so that the pattern of "strong players getting even stronger" will appear in the real estate industry. The 4 new magnates of Wanke, Evergrande, Zhonghai and Baoli have taken shape.

It is learnt that Evergrande is the first Chinese enterprise of mixed ownership that has won the highest rating of several banks. This initiative of the financial industry means its recognition of the edges of the enterprise in comprehensive strength and disregard of its different nature. This is undoubtedly an initiative of great significance for the entire industry and a strong stimulant for the enterprises that already have a certain scale and are also in rapid development to catch up, e.g. Rongchuang, Longguan and Jiazhaoye. It will strengthen their confidence in getting bigger and stronger.

SOURCE Sina Leju

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