Evergrande Group, one of China’s biggest real estate developers, launched three new agribusiness subsidiaries on Monday, as the slowdown in the country’s housing market sends property firms searching for new profit centres.
Evergrande’s new ventures into grain and vegetable oil, dairy, and animal husbandry are only the latest moves toward diversification by the developer owned by billionaire Xu Jiayin (Hui Ka-yan in his native Cantonese).
RMB 100 Billion for the Food Sector
Evergrande appears to be aiming at consumer concern over food safety in China to help build a new and profitable business line. According to an account in the China Daily, Liu Yongzhou, a vice president of Evergrande said that Evergrande will invest more than 100 billion yuan ($16.2 billion) in the agricultural sector in the next few years, accounting for nearly one-tenth of China’s agricultural investment in 2013.
“The area will help ensure green and safe agricultural products for Chinese consumers,” said Liu. Last week the jerseys of Guangzhou Evergrande football club, which is majority owned by the property firm, bore the logo “Evergrande Grains and Oils: Safe Grains, Safe Oils” as Xu and minority owner Jack Ma of Alibaba looked on.
According to Liu, Evergrande has already invested RMB 7 billion in agricultural production bases in Inner Mongolia to help build its new business line.
Three New Industries in One Year
The agribusiness ventures are only the latest moves toward diversification by Evergrande in the last year, and the company’s chairman made it clear that this is a major priority for the firm that made its fortune selling homes in China’s developing cities.
At a conference to announce Evergrande’s mid-year results last month, Xu said, “After years of effort in the real estate sector, we have mapped out a strategic plan to diversify our business. We will rely on the diversified business for future development.”
In January this year Evergrande officially launched its own bottled water brand, promoting the new product on the jerseys and paraphenalia of its league-champion soccer team. Evergrande is also reported to have reached an agreement with a hospital affiliated with Harvard University to open private medical facilities in China.
The company has also taken a five percent stake in China’s Huaxia Bank.
Property Developers Learning to Diversify
Evergrande’s decision to reduce its reliance on China’s real estate sector is following a firmly established trend, as the industry looks for ways to maintain revenues in the face of a housing market slowdown.
Industry leader China Vanke has been spreading out from its residential focus to venture into logistics and retail projects, while state-run competitor Greenland Group has been buying development sites overseas, including projects in the UK, US, Canada and Australia.
Dalian Wanda, the developer owned by billionaire, Wang Jianlin, last month announced a RMB 5 billion ecommerce venture with Baidu and Tencent, and also has been buying assets overseas.