[photopress:Changsha.jpg,full,alignright]Ping An Trust & Investment, a fully owned subsidiary of Ping An Insurance, has signed a strategic co-operation agreement involving RMB 3 billion with the real-estate company CITIC Shenzhen.
Ping An Trust will buy RMB 2 billion worth of assets from CITIC Shenzhen and offer a RMB 1 billion trust fund to the latter for its regional real estate development in Changsha, the capital of Hunan Province (show in the illustration), and Suzhou, which is located in Jiangsu Province. This RMB 3 billion deal is the biggest property investment for Ping An Trust & Investment so far.
What is happening is that CITIC Shenzhen is trying to find a way to widen its financing channel and make financing innovations to gain stable funds. The recent rise in interest rates has resulted in difficulties for real estate companies in gaining support from banks.
For insurance companies there is a different problem. Since the State Council issued its ‘Several Opinions on the reform and development of the insurance industry’ (State Ten Rules) in June of this year, insurance companies have gradually adopted investment strategies that are more aggressive in order to pursue higher capital returns. However, directly investing in the real estate market is still forbidden according to the ‘Insurance Law’ due to the great risks involved.
Ping An Insurance, meanwhile, will be entering the real estate market in its own right through its construction of the Ping An Financial Building in Shanghai. The building costs RMB 2 billion and is expected to be completed in 2007.
Source: China Knowledge