China’s cash-rich property developers go rural for opportunities and political currency
Country Garden, Vanke and Evergrande have announced expansion plans in the countryside, which are unlikely to yield quick returns
China’s cash-rich property developers are beginning to sing to Chinese President Xi Jinping’s tune of investing in the country’s vast countryside and agriculture sector.
Not just a far cry from their core property development business, investments in the rural market are unlikely to generate the level of revenue that selling apartments in the urban cities would. They could, however, buy invaluable political currency as Xi has made “reviving China’s countryside” and “poverty alleviation” among his top priorities.
And developers have unabashedly admitted that central government backing – Beijing has pledged to pour billions of yuan annually to develop the countryside – is motivating their interest to expand in the rural areas.
“Government support is a major factor. It is important for private firms to be seen as moving in sync with priority policy,” said Liu Feifan, a property analyst at Guotai Junan International, adding that corporate chiefs’ personal sentiments also played a part as in the case of Country Garden.
Country Garden, the country’s largest developer by sales, announced its foray into the agriculture industry last Friday, with plans to introduce world-class technology and facilities to the industry, especially in areas of farm machinery and seeding.
One of its subsidiaries said it would invest in a research centre backed by Yuan Longping, known in China as “the father of hybrid rice”, which is developing the third-generation hybrid rice.
“I was ploughing the fields 40 years ago, and now I’ll be back in the paddy fields,” Country Garden chairman Yeung Kwok-keung has repeatedly said this year, with reference to his beginnings as a farmer in southern Guangdong province.
“Country Garden has grown so big, and it is natural for us to do something for farmers, for society and the country.”
The investment would help the company fulfil its corporate social responsibility (as required of Hong Kong listed firms by the Hong Kong stock exchange), as it involved deploying resources to 13 remote counties to help farmers grow new types of crop that could in turn alleviate poverty. Country Garden is also hopeful that the agriculture sector could deliver profitability and in time to come, become suppliers to the company’s urban network of grocery stores.
Yeung, impressed by a corn-harvesting scene in New Zealand more than a decade ago, had seen the huge gap between Chinese agriculture and those of developed markets, and the opportunity to boost efficiency and productivity in the industry. As part of the effort to achieve that, he secured deals on new technology that could be introduced at home during recent visits to Ukraine and Israel, and has built a 1,800-acre (728.4-hectare) modern agriculture base in China’s southernmost province of Hainan.
Country Garden is not the only developer expanding into the rural market. China Vanke, China Evergrande, Dalian Wanda Group and CR Land have indicated similar goals.
Hui Ka-yan, Evergrande chairman, known in the mainland for his shrewdness and who had splashed out to acquire football clubs (Xi is a football fan), has sent money and personnel to China’s most impoverished counties. In April, Evergrande set up a “hi-tech agriculture” subsidiary, aiming to bring automation, big data and Internet of Things to the sector.
China Vanke, on the contrary, has taken a less technology-heavy approach, focusing on its core business – property development – to build homes in the rural market.
“When we talk about ‘rural’, we refer not only to inner-city rural and suburban areas, but also villages far from the cities … we are not only going to build houses, but also to build ‘scenes’, scenes for a beautiful life,” said chairman Yu Liang of the Shenzhen-based company’s rural strategy in March.
Inner-city villages are peculiar to Shenzhen and a legacy from the city’s early but patchy development. As Shenzhen property values soared on the back of limited supply of new land sites, redevelopment of these villages has become a tempting business for local developers.
Vanke’s initial investment into “villages far from cities” is a pilot project in Dongluo Village in eastern Jiangsu province.
Revitalisation of the village involves multi-front efforts including modernising local agriculture; improving the landscape; boosting tourism and turning the village into an educational hub where children from the cities can visit to learn about the countryside, all of which will be undertaken by a joint venture with the local government and villagers.
Guan Xin, vice-general manager of Vanke Nanjing said the aim of the project was not to help Vanke acquire land and sell homes, but to be an independent unit under Vanke’s business portfolio (ranging from health care to education).
“We want to explore a sustainable, replicable rural revival model in Dongluo and expand it to more places,” she said.