[photopress:beijing_sunghunkai.jpg,full,alignright]Shu-Ching Jean Chen writes in Forbes from Hong Kong about the views of a Hong Kong company of analysts. This, perhaps, should be born in in mind.
Fitch Ratings states that real estate developers in China might be separated from their Hong Kong counterparts by only a thin border, but they are about three decades behind in the way they run their businesses.
Them’s fighting words, partner.
It claims that with the exception of Shimao Property Holdings, major Chinese real estate developers such as Hopson, Agile, Greentown China and Shanghai Real rely almost exclusively on building residential projects for the middle and upper classes.
By contrast, Hong Kong developers like Sun Hung Kai, Cheung Kong and Swire Pacific are balance the cyclical real estate development with housing and building and owning commercial real estate.
Sun Hung Kai gets more than 30 per cent of its business from renting offices and shopping malls.
Swire’s residential construction projects account for less than 2 percent, while rental revenue is more than half the total.
Cheung Kong also derives less than 5 percent of its sales from residential development, compared with at least 50 percent from rentals.
All three are active in China but they seek to export business model when they cross the border onto the Mainland. To do business this way requires capital, in short supply for Mainland developers.
Michael Wu, a Fitch analyst, said it will take many years for China’s developers to catch up with Hong Kong. He said, ‘China is a very fragmented market. Chinese real estate developers are much bigger in size than those in developing countries such as Malaysia, but they are small when compared to those in Hong Kong.’