Hong Kong’s New World Development denies withdrawing from China

New World Development has reiterated its recent asset disposals in inland cities do not mean it is withdrawing from China, saying its controlling shareholder Chow Tai Fook Enterprises has in fact committed about 50 billion yuan to three commercial projects on the mainland.

“We have absolutely no plans to withdraw from China. The sale of projects in tier three and four cities was aimed at optimising our investment,” said New World Development chairman Henry Cheng Kar-shun as he and his son and executive vice-chairman Adrian Cheng Chi-kong reaffirmed their confidence in China’s market on Monday.

“We have invested in China for more than 30 years, being one of the earliest Hong Kong firms to enter the market,” he said.

READ MORE: New World Development revives plan to take its mainland China property unit private

New World China Land last month sold three projects – one each in Hubei, Guangdong and Hainan provinces – to Evergrande Real Estate for HK$16.36 billion. This month New World Development and controlling shareholder Chow Tai Fook Enterprises announced the sale of five more projects in mainland China to Evergrande for HK$24.4 billion.

The average selling price in tier three to four cities is 7,000 yuan to 10,000 yuan per square metre, lower than in tier one cities, Cheng said.

For Hong Kong companies, Cheng said, development cost in inland cities could be higher than it is for local players. “Profit margins will be squeezed significantly once home prices fall 10 per cent,” he said. “By cashing out of these projects, we will increase our investment in tier 1 and tier 1.5 cities, which provide higher profitability.”

The mainland’s tier one cities are Shenzhen, Guangzhou, Shanghai and Beijing . According to Cheng, the “tier 1.5” cities are Wuhan, Hangzhou and Ningbo.

He said Chow Tai Fook Enterprises, privately owned by the Cheng family, is building three 500 metre commercial towers, one each in Guangzhou, Wuhan and Tianjin.