Chinese developer Greenland takes another step towards diversification with tech incubators

PUBLISHED : Tuesday, 05 July, 2016, 9:51pm
UPDATED : Tuesday, 05 July, 2016, 10:58pm

Shanghai-based Greenland Holding Group, one of mainland China’s three largest developers, has taken another step toward diversification into non-property businesses, unveiling a new plan on Tuesdaythat could potentially turn multi-million square metres of its commercial properties into incubators for technology start-ups.

Under the plan that took nearly a year to finalise, Greenland is committed to investing significant resources as part of a strategic move to cut its reliance on property development, according to Xue Yingjie, executive deputy general manager of Greenland’s commercial business division.

“It is a grand plan and a strategically important move,” Xue said. “All the 30 million square metres of Greenland’s commercial properties across 80 Chinese cities can be potentially utilised to support the start-ups.”

The new announcement came just two weeks after Greenland inaugurated its platform for cross-border e-commerce business, more evidence that the developer was intent on creating new growth engines after its credit rating was downgraded by Fitch due to high leverage in the property business.

Detailed plans for establishing dozens of incubators on the Chinese mainland are still in the works, but Greenland said all its commercial properties across the 80 cities would earmark a large space for start-ups with a focus on firms in the areas of the internet of things (IoT), cloud computing and telecommunications.

The developer will also offer financial support to the start-ups through its financial subsidiaries and investment funds, with the goal of creating future industrial giants.

Zhang Yuliang, chairman of Greenland, said he was looking at the big picture – a platform that helps local governments attract capital, increase economies of scale and boost city population growth.

“We will bring in advisors to guide the start-ups to the right path to success and [provide] an effective channel for investors to chase high returns,” he said. “For Greenland, a successful incubator platform will eventually add value to our commercial properties.”

Greenland will consider acquiring start-ups if they morph into large-scale businesses, as a way to bolster its non-property businesses, Xue said.

The Shanghai developer has been following the direction given by the central government to revamp its business activities over the past three years. Beijing has been pushing for a transition to a consumption-driven economy with a focus on expanding domestic demand and encouraging entrepreneurial spirit.

Separately, Greenland expects sales from its newly launched cross-border e-commerce platform to top 10 billion yuan (HK$11.6 billion) in the period from 2017 to 2018.

Unable to predict the business size of its new incubator segmentat present, company officials stressed that Greenland was adamant in devoting all of its resources, ranging from property and finance to advisory services, into the new platform.

In mid-June, Fitch downgraded Greenland’s standalone rating from BB-plus to BB, given that its ratio of net debt to adjusted inventory reached 66 per cent at the end of last year, higher than the previous projection of 58 per cent.

A clutch of large-size mainland developers have been seeking to diversify into capital-light industries amid the policy shift initiated by the central government.

The current Beijing leadership is focusing on the quality of growth with a priority given to sustainability rather than the pace of economic expansion.

Property, once the crown jewel of the mainland economy, is now among the so-called overcapacity industries where the government has been acting to reduce excess inventories.

In major cities like Shanghai, land prices have soared to sky-high levels, making it increasingly difficult for developers to maintain high profitability.

Greenland is also looking to strengthen its muscles in the finance sector with plans to set up insurance and brokerage subsidiaries. The group rose into international prominence buoyed by the proactive “go-outbound” campaign. Greenland has an overseas presence in 12 cities across nine countries.