China on Tuesday announced four separate investigations of current and former senior executives at three of the country’s largest state-owned real estate companies over allegations of “serious violations of discipline and law”.
A notice posted by the anti-corruption office in the city of Xiamen, in Fujian province said that Zhuang Yuekai, chairman of Hong Kong-listed Xiamen C&D Real Estate is “suspected of serious violations of discipline and law”, with Shi Zhen, chairman of the group’s C&D Urban Services division also being probed.
On Wednesday, Xiamen C&D’s Hong Kong-listed shares slid 28.9 percent following news of the investigation, while the stock of China Resources Land, which saw its former chairman and chief executive named in one of the notices, slid nearly 4 percent in the morning before closing the day down 1.45 percent.
The probes are another blow to a mainland property sector that accounts for about a quarter of the country’s GDP as it continues to struggle with mortgage boycotts by unhappy homebuyers and home sales that slid 28.2 percent during the first seven months of 2022, compared to the same period a year earlier.
Xiamen SOE Leaders Investigated
Employing language typically used to indicate impending graft charges, a statement posted to the website of Xiamen Municipal Commission for Discipline Inspection of the Communist Party of China Tuesday evening singled out Zhuang, who serves as deputy general manager of Xiamen C&D Group, as well being chairman of the conglomerate’s two Hong Kong-listed real estate units, C&D International Investment Group Limited and C&D Property Management Group.
Shi Zhen, who serves as secretary of Xiamen C&D Group’s party committee in addition to his role with C&D Urban Services was targetted in a separate statement using the same terms.
Announced as Beijing rolls out a reported $147 billion rescue package, some analysts linked the investigations to government attempts to restore confidence among homebuyers who have grown leery of the market.
“Both the debt discussions and the crackdown on domestic corruption can be seen as related attempts to rationalize the broken real estate sector,” said Brock Silvers, chief investment officer at Hong Kong-based Kaiyuan Capital. “Beijing is trying to induce great consumer confidence in various ways, such as providing financing for the completion of housing units in cases and tamping down the mortgage revolt.”
With $111.5 billion of revenue in 2021, Xiamen C&D Group is the largest state-owned enterprise in the southern Chinese port city and ranked 77th on the Fortune Global 500 list released earlier this month.
China Resources Exec Targetted
Across the country from Xiamen, former China Resources Land chairman and CEO Tang Yong was said to be “suspected of serious violations of discipline and law,” in a notice posted by the Communist party’s commission for discipline inspection for Sichuan province.
The statement indicated that Tang, who served as chairman and CEO of the top five mainland developer from December 2019 to September 2021 is now being investigated both by the local government in Sichuan and by the disciplinary committee of China Resources.
Since leaving China Resources Land, Tang, now 51, has continued to work with the group he first joined in 1993, serving most recently as an executive director of China Resources Modern Service Co Ltd, a new division formed from the merger of units managing the tendering, intellectual property management, and secretarial services of China Resources Group.
Shenzhen Public Housing Boss Probed
Also placed under investigation was Liu Hui, deputy general manager of Shenzhen Talents Housing Group, according to a statement by Shenzhen’s anti-corruption watchdog.
Shenzhen Talents Housing Group is the largest public housing developer in the border boom town, where it accounts for about one-third of Shenzhen’s public housing supply.
The state-run enterprise has a registered capital of RMB 100 billion – almost nine times that of China Vanke and seven times that of Country Garden.
The investigations threaten to undermine confidence in China’s state-owned developers, which have enjoyed greater access to credit and stronger home sales as the country’s housing crisis has engulfed many of the privately controlled giants, like China Evergrande.
Analysts linked the salvo of investigations to growing government scrutiny of figures in the semiconductor industry, including Minister of Industry and Information Technology Xiao Yaqing.
China has been investigating a string of high-profile officials and executives in the run-up to the ruling Communist Party’s 20th National Congress at which President Xi Jinping is widely expected to be anointed for an unprecedented third term.