The latest restructuring of two state-owned property companies, announced this week, signals renewed momentum in the consolidation of the real estate industry, according to analysts. Poly Real Estate Group Co and AVIC Real Estate Holding Co have become the latest state companies to announce merger plans, amid President Xi Jinping’s campaign to “forge bigger, and stronger SOEs“. Xi called on Monday for accelerated efforts in the reform of companies in key sectors, adding that efforts to boost their vitality and influence, should be made in a “strident and confident” manner. China Poly Group Corporation said on Wednesday it was discussing the purchase of Aviation Industry Corporation of China’s property assets, which would involve a restructuring of both the subsidiaries, Poly Real Estate and AVIC Real Estate. Poly Real Estate is listed in Shanghai while AVIC Real Estate’s shares are traded in Shenzhen. Both have applied to halt trading because of the restructuring. The parent groups are central SOEs under the direct management of State-owned Assets Supervision and Administration Commission (SASAC). The conglomerates run a variety of businesses including aerospace, defence and mining operations, and there are other property firms within both their organisations. Poly Real Estate is one of the five property giants that saw their sales pass 100 billion yuan in value duering the first half. AVIC Real Estate’s revenue in 2015, however, declined 11.4 per cent to 5.52 billion yuan, with its net loss in the first quarter of this year hitting 156.7 million yuan. That weak performance had already led some analysts to predict AVIC Real Estate would be consolidated into Poly Real Estate. Experts have also suggested the merger is being forced through by the SASAC, rather than the two firms themselves, although officials at both companies have refused to comment. “Real estate is the cash cow of many central SOEs and of major significance in boosting groups’ total assets and profitability, which is critical to corporate leaders’ promotion within the hierarchy,” said Liu Feifan, a property analyst with Guotai Junan Securities. “They would not relinquish the business on their own.” The latest property merger follows another huge consolidation in March, when China Overseas Land & Investment Ltd (COLI) announced plans to restructure with CITIC Real Estate. According to an official statement released at the end of June, COLI is effectively taking over CITIC in return for shares. The consolidation will boost the Hong Kong-listed COLI’s total asset by HKD 155 billion to 582 billion expand its presence to 55 cities from 48 currently, and boost its land bank by 31.55 million square meters. The cost for absorbing such a swath of land is 3,550 yuan per sq m, according to the acquisition price, much cheaper than buying it through public auction. Also in March, China Minmetals Corporation, another state giant under the SASAC, trusted its 40 billion yuan of property assets to its subsidiary Minmetals Land, in an attempt to make the latter the only property platform within the group. After China Minmetals Corporation merged with China Metallurgical Group in June, its property business is also highly likely to be consolidated into Minmetals Land. Guotai Junan’s Liu said all the merger activity is intended to allow SOEs with lackluster property businesses to spin off the assets, allowing them to focus on their core businesses. He added, however, the sellers are not necessarily the losers, as most deals involve swapping assets for equity in better-performing SOEs. The pace of these kinds of property marriages is expected to accelerate in the months to come, which is raising concern among some developers that the resultant larger state-run firms will have added strength to snap up prime land plots at auction. Of the 205 land sale deals that exceeded 1 billion yuan in the first half, SOEs won just over half (106), according to Centaline Property. Some analysts say that boosting their balance sheets to avoid the fate of consolidation is the major incentive behind the land-buying spree. But Fang Ling, from property consultancy CRIC, said many of the more-aggressive bidding at auction has in fact been by the stronger firms, not the weaker ones looking to boost their land banks, meaning that even the likely ongoing mergers are unlikely to dampen land prices.