Economist urges Beijing to bail out developers
Struggling mainland property developers should be allowed to go, hard hat in hand, to Beijing for bailout funds, economists have said.
According to Standard & Poor's chief Asia economist Subir Gokarn, Beijing's 4 trillion yuan (HK$4.54 trillion) fiscal stimulus package should be extended to support private property developers as well as funding government infrastructure projects.
Shares in Hong Kong-listed mainland property companies are suffering as investors fear they will halt projects after failing to raise cash on the stock and bond markets.
Country Garden Holdings shares have plunged 67 per cent in the past six months to HK$1.57, wiping HK$4.8 billion off the company's value and denting the wealth of majority owner Yang Huiyan, the 27-year-old daughter of the company's founder.
Another developer whose investors have negative equity is Guangdong and Beijing builder Guangzhou R&F Properties, whose shares traded at HK$6.60 yesterday, down from HK$15.76 last August.
As mainland economic growth slows, real estate values are sliding too. House prices in urban areas fell 0.4 per cent in December last year, the first annual decline on record, according to the National Reform and Development Council.
Mr Gokarn said Beijing should act to reverse the situation. 'If construction were to slow, the effect on the economy would be dramatic.'
According to the ratings agency, about half of domestic investment involves the construction sector. As a large consumer of cement, iron and steel, developers indirectly support jobs in many other sectors.
'Extending [the infrastructure package to private developers] is probably something that needs to be considered,' Mr Gokarn added, clarifying it was up to the government to work out how to do this.