The headquarters building of Xi'an Construction Group, a 24-story office tower located in the core area of Xi'an High-tech Zone, was scheduled for a judicial auction on the JD.com auction platform with a starting price of 214 million yuan, approximately 70% of its assessed value. However, on May 13, the day before the auction was set to begin, the applicant for enforcement filed a request with the court to suspend the auction, putting the disposal process on hold.
The property owner is Xi'an Construction Group Asset Management and Operation Group Co., Ltd., a subsidiary of the state-owned construction enterprise Xi'an Construction Group. Floors 2 through 24 serve as office space for Xi'an Construction Group and its subsidiaries, while the first floor is leased to a bank. This building is the group's headquarters.
The Jinan Intermediate People's Court in Shandong Province had originally scheduled the first judicial auction of the building for May 14. The total floor area is 24,600 square meters, with an assessed value of 306 million yuan. The starting price of 214 million yuan translates to about 8,700 yuan per square meter. Participants were required to pay a deposit of 22 million yuan. In the prime location of Xi'an High-tech Zone, this price was considered relatively low.
However, the applicant for enforcement's suspension request led to a last-minute halt of the highly anticipated auction. At the time of suspension, the JD.com asset trading platform showed zero bidders, 123 followers, and 9,917 viewers. While nearly 10,000 people viewed the listing, no one submitted a bid.
Suspending an auction is not uncommon in judicial practice. When an applicant for enforcement requests a suspension, it often indicates that they believe alternative methods, such as debt restructuring or repayment negotiations, may better achieve debt recovery. However, a suspension is not a termination; the building could be relisted for auction at any time.
The suspension also revealed another issue: the building is subject to an unusually long lease. The original lease, signed in June 2022, was set to expire on November 30, 2025. However, before the original lease expired, it was extended to May 31, 2042—nearly 20 years. Furthermore, the rent was reduced from 79 yuan per square meter per month to 54 yuan, a drop of over 30%. The tenants are primarily Xi'an Construction Group and its subsidiaries.
Additionally, the building is mortgaged and has been successively sealed by courts in various regions, creating multiple layers of encumbrances. Legal experts have noted that long-term, low-rent leases signed with related parties during a debt crisis are likely to be deemed invalid by courts if challenged by creditors, particularly if the terms are deemed unreasonably low or indicative of collusion. This means that even if a buyer acquires the building, they could potentially invalidate the lease and require Xi'an Construction Group to vacate the premises.
The existence of this lease has deterred potential buyers. Investing over 200 million yuan in a property with rental income locked at below-market rates for two decades, with no guarantee of evicting tenants, makes the investment unattractive. This explains why nearly 10,000 people viewed the auction but no one placed a bid.
A building that once symbolized Xi'an Construction Group's glory now faces an uncertain future.
The downfall of Xi'an Construction Group can be traced back several years. The group's history dates to 1953, and in 2009, it was restructured into Xi'an Construction Group through the merger of several local construction and design entities. It was a well-established local state-owned enterprise.
A significant turning point occurred in 2017 when Greenland Holdings invested 1.071 billion yuan to acquire approximately 66% of Xi'an Construction Group's shares, with the Xi'an State-owned Assets Supervision and Administration Commission retaining 34%. This mixed-ownership reform was hailed as a milestone for local state-owned enterprises in Xi'an. Greenland pledged to provide brand support, resources, and access to its national market network to help Xi'an Construction Group expand.
The results were immediate. From 2017 to 2021, Xi'an Construction Group's operating revenue surged from 12 billion yuan to 43.4 billion yuan, with an average annual growth rate of about 40%. Total profits increased from 226 million yuan to 1.16 billion yuan. During this period, the company was a rising star, climbing from 11th to 4th place on Xi'an's list of top 100 enterprises.
However, this rapid growth concealed a critical vulnerability: heavy reliance on projects from related parties. Xi'an Construction Group undertook numerous projects for Greenland Holdings and EVERGRANDE. As of the end of June 2023, the contract value for Greenland projects alone was 9.661 billion yuan, with 7.247 billion yuan completed. However, only 4.899 billion yuan had been collected, leaving over 2.3 billion yuan in unpaid receivables. The situation with EVERGRANDE was worse, with 13 projects totaling 4.3 billion yuan in contract value. Following EVERGRANDE's debt crisis, these projects resulted in over 1 billion yuan in accounts receivable and bad debt provisions.
Starting in 2022, Greenland Holdings itself faced a liquidity crisis, extending its offshore U.S. dollar bonds and experiencing declining sales. This severed Xi'an Construction Group's payment chain. That year, the company's operating revenue fell by 8.3 billion yuan, a decrease of nearly 20%. In 2023, the situation worsened, with revenue dropping to 14.1 billion yuan—a nearly 60% decline—and a net loss of over 900 million yuan, marking the first loss since the group's establishment in 2009.
By 2024, conditions deteriorated further. Annual revenue fell to 9.1 billion yuan, with a net loss attributable to the parent company of 857 million yuan. Accounts receivable exceeded 8 billion yuan, and the asset-liability ratio remained around 80% for several consecutive years, well above the construction industry's warning threshold of 70%. In the first three quarters of 2025, revenue further contracted to 4.7 billion yuan, with losses continuing.
Debt default became inevitable. On August 19, 2024, Xi'an Construction Group failed to repay a medium-term note totaling 263 million yuan in principal and interest, marking a formal default. In the six months prior, rating agency Dagong Global Credit Rating had downgraded the company's credit rating four times, from AA+ to BBB-. Within a day of the default, the rating was further downgraded to C, a six-notch decline in half a year.
The default did not resolve the crisis. By the end of 2025, Xi'an Construction Group's overdue debt principal exceeded 3 billion yuan. The company and several subsidiaries were listed as dishonest debtors by courts across the country for failing to fulfill legal obligations and violating property reporting systems. The auction of the headquarters building is just the tip of the iceberg.
Following the public debt crisis, Xi'an Construction Group established a financial creditors' committee under the guidance of the Shaanxi Banking Association and with support from provincial and municipal financial offices and state-owned asset regulators. Sixteen institutions are involved, but a specific debt restructuring plan has yet to be announced.
Internally, the company faces mounting challenges. Industry reports indicate that delayed salary payments for employees have become routine, with headquarters staff unpaid for months and some project-based employees not receiving wages for up to a year.
Xi'an Construction Group's struggles are not an isolated case. In recent years, numerous construction companies, from local state-owned enterprises to private firms, have faced similar difficulties. This reflects several industry-wide issues during a cyclical downturn.
First, expansion models overly reliant on related parties. Many construction companies, through mixed-ownership reforms or partnerships, have undertaken numerous projects for real estate developers. While profitable during market upswings, this model leaves them vulnerable when upstream developers face liquidity crises. Unpaid receivables turn into bad debts, projects stall, and advanced material and labor costs go unrecovered, triggering sudden debt pressures. Xi'an Construction Group's rise and fall closely mirror Greenland Holdings' trajectory, highlighting how such partnerships can become liabilities during downturns.
Second, poor capital management and excessive leverage. The construction industry inherently operates with high leverage, often requiring companies to advance funds for projects. Many firms accept unfavorable payment terms to secure contracts, even financing developers' projects themselves. When payments are delayed, cash flow dries up rapidly. Xi'an Construction Group's asset-liability ratio, consistently above 80%, left little buffer for such delays.
Third, fragile credit systems. Xi'an Construction Group's descent from rating downgrades to default occurred in less than six months, underscoring the market's sensitivity to construction sector risks. Negative developments, such as payment delays or subsidiaries being listed as dishonest debtors, quickly lead to tightened bank credit and closed financing channels, eliminating options for refinancing. Restoring lost credit is exceedingly difficult.
Fourth, legal risks in core asset disposal. Xi'an Construction Group's last-minute 20-year, low-rent lease for its headquarters building, while seemingly a temporary measure to retain office space, is legally precarious. More importantly, it significantly reduces the asset's auction value. Buyers are reluctant to acquire properties burdened by long-term, below-market leases. Such actions, intended as self-protection, can render assets unattractive and undermine creditor recovery, creating a lose-lose situation.
The first auction of the headquarters building ended with a suspension requested by the applicant for enforcement, adding uncertainty to the fate of the 24-story tower. Whether this leads to a settlement, a breakthrough in debt restructuring, or a relisting after the suspension period remains unclear. Regardless, Xi'an Construction Group's debt troubles are far from resolved.
From a mixed-ownership reform success story to a defaulting entity, and from its headquarters facing auction to a suspended sale, this state-owned enterprise's trajectory reflects broader challenges in the construction industry during cyclical shifts. Liquidity crises among upstream developers have cascaded down the payment chain, overwhelming downstream construction firms. High leverage, asset-heavy operations, and reliance on related parties have amplified these risks.
Xi'an Construction Group's debt resolution efforts are ongoing. Whether the 16-member creditors' committee can devise a viable restructuring plan, whether unpaid employee salaries will be addressed, and whether the headquarters building will return to the auction block remain unanswered questions. The fact that nearly 10,000 people viewed the auction without a single bidder, coupled with the applicant for enforcement's decision to pause the process, suggests that the situation may not yet be irreparable. Time will tell the final outcome for this building and whether Xi'an Construction Group can emerge from its current predicament.
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