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Opinion | China’s real estate rethink can help end developers’ debt addiction
The future of Chinese property looks to be smaller and more rational, with a market defined by real estate’s worth rather than volume
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For five years, China’s real estate sector has been defined by a punishing narrative of default and contraction. This era of discipline reached a pivotal threshold when China Vanke, the industry’s bellwether, recorded an 82 billion yuan (US$11.8 billion) loss. Crucially, this disclosure arrived only a few days after a strategic injection from its largest shareholder, Shenzhen Metro Group.
The timing of the 2.36 billion yuan lifeline was a deliberate signal. By restoring ties right before the deficit became public, the state-backed shareholder provided a pre-emptive anchor against the impending shock. This sequence transcends mere risk containment. It represents a strategic endorsement of creditworthiness, indicating that Beijing is prepared to stabilise its most prominent players before the market reacts to the final clearing of their debt-fuelled past.
A distinct philosophy of asset realism is emerging among leading state-owned developers. This approach rejects the high leverage, high turnover model that fuelled the previous boom, prioritising instead asset quality and operational yield.
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The evolution of China Jinmao offers a case study in this transition. The state-backed developer has seen its valuation surge thanks to a radical shift in business logic. By aggressively upgrading product specifications, Jinmao managed to drive up its average selling price in a down market.
While competitors remain trapped in a price war, Jinmao has pivoted to a value war, betting liquidity will flock to superior assets in a shrinking economy. Survival now depends on pricing power rather than scale.
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This strategic pivot is also reshaping the behaviour of major state-owned enterprises such as China Resources Land and China Overseas Land and Investment. The shift is driven by the State-owned Assets Supervision and Administration Commission, which has altered performance metrics from simple revenue rankings to return on equity and market capitalisation management.
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