Shares in CC Land (1224.HK) have resumed trading after being suspended yesterday based on the company’s implication in a graft trial. Wen Qiang, former head of Chongqing’s justice bureau who is standing trial on corruption charges, had supposedly received over US$200,000 in bribes from Tsang Wai-choi, vice chairman of CC Land. In a statement to the Hong Kong Stock Exchange, the company denied that Tsang had offered any bribes to Wen and the former official’s trial is “unrelated to the company or any of its subsidiaries.”
The central government’s clampdown on corruption in Chongqing – several crime syndicate leaders have been sentenced to death while the number of officials standing trials continues to escalate – highlights the risks involved in doing business in the southwestern municipality. Fifty-nine percent of CC Land’s land bank lies in Chongqing and, despite denying the bribery allegations, the company’s reputation is at risk.
The government has heavily invested in developing Chongqing as a regional economic hub and the municipality, together with nearby Sichuan provincial capital Chengdu, has benefited from a healthy local property market. Many smaller local developers having already been closed down as part of the graft probe. Having listed developer’s name tied to the scandal does not bode well for a property market that was once the darling of central government policy makers. At the midday close in Hong Kong, CC Land was down 3.77% at HK$2.81.