Li Ka-shing

Li Ka-shing says he’s upbeat on China’s long term outlook

PUBLISHED : Tuesday, 21 June, 2016, 8:33pm
UPDATED : Tuesday, 21 June, 2016, 8:33pm

Li Ka-shing, the richest man in Hong Kong, has cast a vote of confidence in China’s economic outlook, saying he’s upbeat on the nation’s prospects even as growth in the world’s second-largest economy is slowing.

“The long-term outlook for the mainland is good,” the 87-year-old chairman of CK Hutchison Holdings said in an interview with Bloomberg Television.

Speaking from his office on the top floor of Cheung Kong Center in Central, Li said his optimism was based on China’s strength as an export powerhouse.

“People only see the debt in the state-owned enterprises and in households, when they need to recognise that China is a big exporter,” Li said.

He noted that China’s trade surplus totalled 3.7 trillion yuan (HK$4.4 trillion) last year, providing a buffer as the weaker yuan spurred capital outflows.

Meanwhile, Li’s property flagship, Cheung Kong Property, on Tuesday offered a three-year mortgage loan as high as 123 per cent of a flat’s value to entice sales for the remaining units at Yuccie Square in Yuen Long.

The financing scheme was announced a day after the Hong Kong Monetary Authority said it is studying where additional controls are needed to guard against credit risks related to “loans provided to property developers offering mortgage loans with high loan to value ratios.”

Cheung Kong Property’s financing scheme, to be offered from June 25 -July 3, will require applicants to pledge another property as collateral.

Sun Hung Kai Properties announced last Thursday it would provide mortgage loans of up to 120 per cent for buyers of Park Yoho Venezia.

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In September last year, Li became the focus of intense debate amid criticism that companies under his control were pulling out of mainland and Hong Kong markets.

In November 2014, Hutchison Whampoa sold a 71.36 per cent stake in Hutchison Harbour Ring, which owned office towers in Shanghai, to Shenzhen-listed Oceanwide Holdings for HK$3.82 billion. In October 2013 Hutchison Whampoa and Cheung Kong sold Oriental Financial Centre in Shanghai to Bank of Communications for HK$8.96 billion

In June last year, Li completed the massive group restructuring by merging all non-property businesses into Cayman Island-based CK Hutchison. The group’s property business was injected into another new entity Cheung Kong Property.

“It is understandable for Li to sell down assets in the mainland as even local developers face a squeeze on profit margins amid intensifying competition,” said Phillip Capital Management fund manager Li Kwok-suen.

Another analyst noted that the billionaire has not made any recent property acquisitions on the mainland as land prices have likely not reached bottom.

Earlier this month, David Lipton, the International Monetary Fund’s first deputy managing director, urged China to take “imperative actions” to address vulnerabilities such as the rapid rise of debt, excess capacity and flawed financial markets. Lipton said overall debt in China was equal to 225 per cent of GDP. Of that, corporate debt amounted to about 145 per cent. The IMF forecasts growth in China to slow to 6 per cent in 2017.

Two rating agencies, Standard and Poor’s and Moody’s, also downgraded their outlook for China’s sovereign debt earlier this year.

Li, who was born in Chaozhou, a city in the eastern Guangdong province, has much at stake in the mainland. Cheung Kong Property Holdings, a unit of CK Hutchison, derives about half its revenue from the mainland and has dozens of properties in the country spanning thousands of acres. His flagship company, CK Hutchison, generated 14 per cent of its earnings before interest and taxes from China.

In the interview with Bloomberg Television, Li also stepped up his calls for Britons to vote in favour of staying in the European Union as the world braces for the outcome of this week’s vote.

“If Brexit happens, it will be detrimental to the UK and it will have a negative impact to the whole of Europe,” said Li.