Economy

71 central enterprises not leave real estate

By Hu Yang (chinadaily.com.cn)
Updated: 2010-12-06 15:13

China's commercial banks have been told that for those central enterprises which are involved in the real estate business, only 16 are entitled to property development loans. The latest regulation is designed to force reluctant central enterprises out of the real estate sector by tightening capital, the China Securities Journal reported Monday.

Banks now are only allowed to extend new real estate loans to 16 authorized central enterprises. They were also told to withdraw existing property loans as early as possible from unqualified enterprises.

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The country's State-assets watchdog in March told 78 central enterprises whose core business is not real estate to pull out of the property sector, but only seven enterprises followed the order. Seventy-one enterprises with more than 200 real estate development subsidiaries remain in the market.

Central enterprises are reluctant to leave the property sector because they are optimistic about the market's future despite the recent tightening measures by the government, insiders from the property industry said. Most companies were to see how their counterparts would react to the order, causing the current impasse.

The latest regulatition will close financing channels for most central enterprise-administrated developers and likely force them off the playing field, experts said.

Sources also predicted the move will lead to a new wave of mergers and acquisitions in the real estate industry.