image

Xi Jinping's anti-graft campaign

Beijing casts net far and wide in anti-graft push

PUBLISHED : Monday, 20 October, 2014, 4:56am
UPDATED : Monday, 20 October, 2014, 4:56am

The crisis facing Hong Kong-listed Agile Property Holdings after its chairman was put under house arrest has aroused investor concerns about how widespread President Xi Jinping's anti-graft campaign will be in the struggling property industry.

Qi Jingmei, a senior researcher at the State Information Centre, a government think tank in Beijing, told the South China Morning Post that corrupt government officials should be worried, but not competitive developers.

"It will not harm the development of the whole real estate industry," she said. "But it's not bad to wash out some weak developers through such a campaign."

Li Junheng, the head of research at JL Warren Capital, a New York-based independent equity research firm with a China focus, said: "Widespread corruption in itself is not new news, but fraud investigations and consequential funding cutoffs are material headwinds for developers."

A housing glut continued to plague the industry and developers needed to strengthen their corporate management during the downturn, Qi added.

The central authorities last month switched their policy stance to support the property sector, ending a tightening campaign of almost five years after sales slumped and prices fell.

The sector accounts for about 15 per cent of the mainland's gross domestic product and affects more than 40 other industries, acting as a drag on the whole economy.

"So far, there are no signs that the anti-graft campaign is derailing the real estate market," Qi said. "If it does, the government may take appropriate measures."

The Communist Party will hold its fourth plenum until Thursday to lay down key policies governing the country's economic and social development in the years ahead.

"The party will take the chance to celebrate its success in its campaign against corruption, although we believe it will continue the intensity in rounding up corrupt officials in coming months," said Lu Ting, the chief China economist at Bank of America Merrill Lynch, last week.

The party's anti-corruption investigations launched since 2013 had found pervasive collusion between officials and developers, in 20 of the 21 provinces, Xinhua said.

The agency said last week that the party's Central Commission for Discipline Inspection found abuses in land sales, real estate development, construction and personnel appointments in Fujian, Liaoning, Shandong and Henan.

In Hainan, Xinjiang and Ningxia, children and other family members of officials were found involved in real estate development within their jurisdiction, which was against party rules, it added.

The investigation in Yunnan hit Agile, which has three tourism resort projects involving an investment of more than 3 billion yuan (HK$3.8 billion) this year.

Chairman Chen Zhuolin has been required to stay at a designated residence since September 30 by the Kunming procuratorate, and the firm has been unable to contact Huang Fengchao, who is in charge of the projects in Yunnan and Hainan provinces.

The announcements came after Agile denied reports that it assisted in money laundering and the mainland's former security tsar Zhou Yongkang had a close relationship with Chan Cheuk-yin, Chen's youngest brother and now a co-acting chairman.

Rumours soon spread about Kaisa Group Holdings that chairman Kwok Ying-shing was detained or could not be reached. "Such allegation is unfounded and untrue," the developer said last Friday. "The operations of the company remain normal."