China Property Firm Greenland Plans Backdoor Listing in Shanghai

March 18, 2014 

State-owned property conglomerate Greenland Holding Group plans to list on China's domestic A-share market through an asset swap with a Shanghai-listed firm, likely becoming the first property developer to go public on a mainland exchange since listing approvals for real-estate firms were suspended in 2010.

The move suggests that Chinese authorities are easing their once-tight grip on the property market, showing less concern over rising prices than for the need to boost the country's economic growth.

Greenland, which has expanded aggressively abroad over the past year, plans to inject 65.5 billion yuan ($10.6 billion) worth of assets in Shanghai Jinfeng Investment Co., as part of the backdoor listing process.

Beijing has rolled out a number of measures to keep property prices from spiraling higher over the past four years though it has had mixed results. Its measures included curbs on purchases of second homes as well as restrictions on funding for property firms.

In 2010, the China Securities Regulatory Commission stopped approving initial public offering applications from real-estate firms to cool speculation in the sector and keep prices in check. It also disallowed mergers, acquisitions and other refinancing tools for the sector.

Greenland's proposal for the backdoor listing was first reported by local media in July. The company completed a backdoor listing in Hong Kong last year.

Shanghai-based Greenland said it is proposing the asset swap as it needs a listed vehicle to "expand its financing channels, boost its competitiveness and growth rate," according to a statement by Jinfeng posted on the Shanghai Stock Exchange website Monday.

Greenland's asset swap is still subject to approval from the securities regulator and the state-owned Assets Supervision and Administration Commission. Jinfeng's shares, which had been suspended from trading on July 1, resumed trading Tuesday, according to a statement by Jinfeng filed to the Shanghai Stock Exchange on the same day.

Earlier this month, Shenzhen-listed property developer China Vanke said it has received long-awaited approval from the securities regulator to convert its thinly traded China-listed B shares to Hong Kong-listed shares, more than a year after it first announced plans to do so.

The central government didn't announce further property-tightening measures during the annual parliament meetings earlier this month, raising hopes among cash-strapped property developers for a more accommodative credit environment.

But some analysts noted that Greenland and Vanke are prominent property developers that have a large presence nationwide and are more favored by regulators, while smaller developers might continue to struggle with their restructuring and fundraising proposals.

Since August, smaller Chinese developers have submitted fundraising proposals, but so far none of those proposals have been approved by regulators.

A domestic listing by Greenland could also be part of an effort to overhaul state-owned enterprises. Chinese officials have said that they aim to revamp inefficient state-owned enterprises into more market-based firms as part of the country's reform agenda this year. Greenland is controlled by the government of the city of Shanghai.

Greenland is among several high-profile Chinese property companies that have gone on an overseas shopping spree, purchasing big real-estate projects in places such as the U.S., Australia, the U.K., Canada and South Korea.

So far this year, Greenland said it would buy real-estate projects in London, Toronto and Malaysia totaling $5.6 billion. It added in earlier statements that it planned to invest in France and Singapore this year.

Jinfeng's shares rose 9.94% in the morning trade on Tuesday at 5.75 yuan.