(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
By Chan Ka Sing
HONG KONG, March 26 (Reuters Breakingviews) - Chinese regulators are ordering financial institutions to step up approval and issuance of loans to property developers that need fresh financing. Beleagured China Vanke could be in line for some extraordinary support, however.
The private developer has suffered a slew of credit rating downgrades and is under pressure to repay debt early, with banks reluctant to lend. But there is one financial institution just 40 minutes’ drive away from its Shenzhen headquarters that could offer a helping hand: Ping An Insurance .
In some ways, the $90 billion insurer is already on Team Vanke. Ping An does not appear to be among its Chinese peers pushing the developer for early repayment, for example.
Extending further support could be seen as a big ask. Ping An reported a 23% decline in 2023 net profit earlier this month. This followed a 29% decline in the prior year - its biggest annual profit fall since 2008 - when it wrote down investment and debt linked to troubled developer China Fortune Land
.
Ping An insists risks in the real estate industry are manageable. That's hard to unpick. As of December, it has invested 204 billion yuan ($28.3 billion), or 4.3% of its insurance funds, in real estate. The figure doesn’t include exposure of the financial conglomerate’s other affiliates. Property-related debts at Ping An Bank , for instance, amount to nearly 290 billion yuan.
If supporting Vanke helps to stablise the sector and in turn, protect its own balance sheet, that could be a win. Vanke was seen as a solid developer until very recently. If it fails, confidence in the sector will hit a fresh low. In November Reuters reported that Beijing wants Ping An to lead a bailout of Guangdong-based Country Garden . The insurer said it has not been approached.
By contrast, Ping An and Vanke are made for each other. Both firms were created after Shenzhen pioneered a raft of China's economic reforms in the 1980s. As a result both are backed, and partially owned, by state entities – yet still run by professional managers as private sector firms. Shenzhen Metro, a state-owned enterprise, owns 27% of Vanke; the Shenzhen government owns about 5% of Ping An through an investment vehicle.
Ping An’s shareholders may balk. The insurer tried to catch a falling blade before with its 2008 investment in Fortis Investments, the global asset management arm of Fortis. It wrote off most of the investment when the Belgian-Dutch group was nationalised later the same year. Vanke is a different beast and Chinese authorities are scrambling. Don't be surprised if Ping An steps up.
CONTEXT NEWS
Chinese regulators are pushing banks to speed up approvals and issuance of new loans to a “whitelist” of property projects, Reuters reported on March 26, citing people with knowledge of the matter. The programme covers projects of state and private developers that need financing of 1.5 trillion yuan ($208 billion) by the end of March, the report added.
China will step up efforts to support the real estate sector, which has “a direct bearing” on economic and social development, the State Council said after an executive meeting on March 22. The Chinese cabinet will refine policies further to ensure the delivery of housing projects, and financing coordination “deliver tangible results”.
(Editing by Una Galani and Nivedita Bhattacharjee)
((For previous columns by the author, Reuters customers can click on KaSing.Chan@thomsonreuters.com; Reuters Messaging: KaSing.Chan.thomsonreuters.com@reuters.net))
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