Following the delisting of 12 real estate companies last year, China is now facing the potential delisting of two more long-standing real estate firms. In the first four months of this year, China’s real estate sales have dropped by 46.8% year-on-year. The concept of “hundred-billion-yuan real estate companies” is now rarely mentioned.
On May 8, the stock of Jiangsu Zhongnan Construction Group Co., Ltd., “ST Zhongnan,” hit the limit down again, with its share price remaining below 1 yuan (14 cents) for 20 consecutive trading days, facing delisting.
At the same time, Shanghai Shimao Group Co., Ltd., “ST Shimao,” also faced potential delisting after its share price fell below 1 yuan and continued to decline despite subsequent daily limit up movements unable to return the price within the set timeframe.
Both companies are long-standing A-share listed companies. Zhongnan Construction has been listed since March 2000, totaling 24 years to date. Shimao Group was listed in February 1994, totaling 30 years to date.
In the face of the threat of delisting, both companies had tried various measures, such as executives increasing their shareholdings and selling assets, to no avail.
According to statistics from the China Real Estate Association, last year, a total of 12 real estate companies in Mainland China and Hong Kong were delisted. Eight A-share companies were delisted due to “the closing price remaining below 1 yuan for 20 consecutive trading days,” while H-share companies, four in total, were delisted due to “the mainboard company’s securities remaining suspended for 18 months without completing the resumption guidelines.”
The eight delisted A-share real estate companies were: ST Yangguang City, ST Taihe, *ST Jiakai, *ST Songdu, ST YueTai, ST Meizhi, *ST Zhongtian, *ST Languang. The four delisted H-share real estate companies were: Sansheng Holdings, Carnival International, Nanhai Holdings, and XinLi Holdings.
Notably, several real estate companies in the Hong Kong stock market are currently in a suspended state. Over ten Chinese real estate companies suspended trading on April 2 due to delayed publishing of their 2023 financial results. Prior to this, eight real estate companies were already suspended, potentially facing the risk of delisting due to prolonged suspensions.
Both Zhongnan Construction and Shimao Group were once “hundred-billion-yuan real estate companies,” with annual sales exceeding one hundred billion yuan (approximately $13.8 billion). However, both companies fell out of this league in 2022 and are now facing delisting in less than two years.
Among the aforementioned delisted companies, XinLi Holdings, Languang Development, Yangguang City, and Taihe Group were also part of the “hundred-billion-yuan real estate companies.” However, the overall downturn in the Chinese real estate industry has led to their delisting.
The concept of “hundred-billion-yuan real estate companies” originated in 2010 when the real estate giant Vanke in Shenzhen became the first Chinese company to achieve this milestone.
Over the following decade, the Chinese real estate industry experienced rapid growth, resulting in an increasing number of companies reaching this achievement. By 2020, China had reached a peak of 43 hundred-billion-yuan real estate companies. This number remained steady in 2021.
However, in 2020, the Chinese government emphasized “housing is for living in, not for speculation,” followed by policies such as the “three red lines” for financing and the “two red lines” for mortgages. Coupled with the outbreak of the Covid-19 pandemic and the stringent zero-Covid policy, the Chinese real estate market entered a downturn.
In just one year of 2022, the number of hundred-billion-yuan real estate companies dropped by 23, more than half. The remaining 20 companies also experienced a significant decline in performance. According to data from the China Real Estate Association, the number further decreased by 40% in 2023, leaving only 12 hundred-billion-yuan real estate companies.
It is uncertain how many hundred-billion-yuan real estate companies will remain this year. Currently, the term is seldom mentioned, with “survival” becoming the critical keyword for Chinese real estate firms.
The cycle of rise and fall of the hundred-billion-yuan real estate companies has come to an end: from initial sales performance to the pursuit of scale and key indicators by real estate firms. With the conclusion of the era of Chinese real estate, the term “hundred-billion-yuan real estate companies” is exiting the stage of history.
The situation in China’s real estate market remains challenging this year, with a significant decrease in sales. According to the latest report from CRIC, a real estate research organization in China, in the first four months, the Chinese real estate market continued to operate at a low level, with the total sales plummeting by 46.8% year-on-year among the top 100 real estate companies.
The report also reveals that in April, the sales threshold for various echelons has reached the lowest level in recent years. The threshold for the top 100 companies decreased by 47.7% to 1.85 billion yuan (about $260 million). For the top ten real estate firms, the threshold fell by 57.3% to 25.88 billion yuan (about $3.58 billion).
On April 30, the Central Political Bureau meeting of the Communist Party of China proposed a policy to “digest the existing housing inventory,” encouraging localities to relax restrictions on home purchases.
On May 9, the two provincial capitals, Hangzhou in Zhejiang Province and Xi’an in Shaanxi Province, announced the complete removal of housing purchase restrictions. Purchasing homes within these cities no longer requires qualification review and was immediately implemented upon announcement.
Hangzhou’s announcement also includes allowing non-Hangzhou residents who have obtained legal property rights in Hangzhou to apply for household registration.
Prior to this, many places in China had already lifted restrictive policies, including popular cities like Suzhou, Nanjing, Hefei, Jinan, Qingdao, Wuhan, Wuxi, Ningbo, Chengdu, and Changsha.
According to monitoring data from China Index Research Institute on the Chinese real estate market, only six locations nationwide still have restrictions on home purchases, including Beijing, Shanghai, Guangzhou, Shenzhen (the four first-tier cities), Tianjin, and Hainan Province.
Some of these locations have partially relaxed restrictions: Guangzhou has lifted the restriction on housing above 120 square meters; Shanghai has allowed non-local single individuals outside the outer ring to purchase homes; and Tianjin’s latest policy allows residents in the six districts to purchase new homes exceeding 120 square meters without restrictions.
Even the heavily regulated capital, Beijing, has relaxed purchase restrictions. On April 30, Beijing issued a notice allowing local households owning two residential properties to purchase an additional property outside the Fifth Ring Road. This marks the first adjustment to Beijing’s housing purchase restriction policy in 13 years.
However, commentator Zhang Tianliang believes that the measures taken by the Chinese government are ineffective. He stated on his self-media program “Daylight Moment” on May 10 that the Chinese people are not refraining from buying homes due to purchase restrictions but rather because they cannot afford them. Hence, even with the relaxation of purchase restrictions, it is unlikely to improve the Chinese real estate market.
Zhang Tianliang further commented that the current real estate crisis in China is much more severe than the 2008 subprime crisis in the United States. The real estate crisis is triggering a financial crisis that could impact both the Chinese government and local residents, leaving little room to escape the repercussions.