As the crisis in the Chinese real estate market continues to worsen, in recent years, real estate companies have been forced to delist, privatize voluntarily, and there have been increasing instances of secondary debt defaults. Analysts believe that the real estate bubble in China exceeds that of Japan more than twenty years ago, and its depth is unimaginable. The current Chinese Communist Party (CCP) is exerting high-pressure control over the real estate crisis, similar to accumulating floodwaters behind a dam. Once the dam collapses, there will be no time to escape, and the prospects are grim.
Central-owned enterprise COFCO Group’s subsidiary, Dayue City Real Estate, recently announced that its shareholders have approved a resolution for privatization, and the company will officially delist from the Hong Kong Stock Exchange on November 27.
Last month, China Minmetals Group’s real estate platform, Minmetals Real Estate, revealed that the company is undergoing privatization delisting.
In addition to the two aforementioned state-owned enterprises, other companies undergoing privatization include Shouke Property, China Fortune Land Development under the Gold Mau Group, and Huafa Property under Huafa Group.
Currently, a total of 23 Chinese listed real estate companies on A-shares and H-shares have been forced to delist, with 11 on H-shares and 12 on A-shares. Additionally, seven real estate companies have chosen to “privately delist.”
Regarding the large number of real estate companies being forced or voluntarily delisting, David Huang, an economic scholar living in the United States, told Epoch Times that there are three main reasons for this trend.
Firstly, the collapse of company valuations and the loss of financing capabilities: Over the past decade, Chinese real estate companies used the listed platforms as leverage for high valuations and financing. However, during this round of the real estate crisis, stock prices have remained chronically low, and transaction volumes have significantly decreased. Many companies’ market values have plummeted, leaving them with no opportunity for further financing. Therefore, the stock market is no longer seen as an asset for these companies; rather, it has become a liability, resulting in delisting.
Secondly, passive delisting triggered by regulatory rules: Companies like Evergrande have been suspended from trading for an extended period, unable to submit financial statements. Being forced to liquidate due to bankruptcy court proceedings in Hong Kong leads to passive delisting.
Thirdly, proactive privatization delisting, similar to the strategy of gradually closing the door to stop water flow: Some real estate companies choose to delist through privatization because their stock prices have been severely undervalued, and post-delistment disclosure requirements are significantly reduced, providing more flexibility in handling financial statements.
Chinese issues expert Wang He told Epoch Times that from a policy perspective, this situation has always existed, but since the chairmanship of the China Securities Regulatory Commission Wu Qing in 2024, a new “National Nine Articles” was introduced to strengthen delisting efforts. This year, at the execution level, actions have become more stringent, directly delisting companies whose stock prices are performing poorly.
He said that real estate companies that proactively delist experience deteriorating operational performance with no signs of improvement. If they don’t delist voluntarily, they will be delisted obligatorily. Continuous forced delisting is worse for them than voluntarily delisting.
Will this phenomenon continue in the future? David Huang believes it will. The current situation is only the first wave, targeting the most vulnerable and susceptible companies in the funding chain, but more companies will face challenges in the future.
Analyzing from the perspective of the real estate industry’s overall environment and CCP policies, expert Wang He also believes that the wave of real estate companies delisting will continue. He stated that the Chinese property market has been in a long-term downward trend, with no clear resolution in sight, making it difficult for some real estate companies, including state-owned enterprises, to survive.
Former Chinese Finance Minister Lou Jiwei recently stated that the real estate market will continue to decline over the next five years. Wang He said that the transformation of Chinese real estate companies is ongoing and must continue. This transformation is a process that involves addressing many debt crises. The previous high turnover, high leverage, and high debt model cannot be sustained; transformation is necessary. However, during this transformation, many enterprises are likely to fail, including some state-owned real estate companies.
Wang He explained that from a policy standpoint, the CCP will continue to force real estate companies with underperforming financial results to delist. The CCP aims to revital…