Sharp Reversal

Wang Shi, founder & chairman of Vanke, China’s largest developer, gave a lucid account of the current property scene in China on the WSJA today.

China’s property market was in doldrums in 2008. After years of soaring sales & rising prices, the government began imposing restrictions on sales & lending in 2007. Prices peaked in July 2008 and by Oct 2008, residential property sales were down by 17%. Debt-ridden developers are stripped of cash. The global financial crisis actually saved at least 1/3 of Chinese developers from bankruptcy with the Chinese government announcing a ￥4 Trillion (USD585Bn) economic stimulus package, essentially asking the banks to lend more. Much of the soaring loans went to properties. The sharp turn in sentiments & reaction is amazing. Since March 2009, both property sales and prices have risen month by month. Total floor space sold in the first 10 months of 2009 rose 50% compared to the same period in 2008. Prices increased overall by 4%. Shenzhen marked the highest increase of 13.8%, followed by Hangzhou at 6.6%

Vanke, founded by Wang Shi 25 years ago, has operations in more than 30 cities. I had the opportunity to work with the Vanke team & met with Wang at one occasion. A well managed and highly disciplined team. At 58, Wang should be cloning more of himself as corporate leaders to improve overall corporate governance in China.

Wang detailed to WSJA that Vanke’s original sales target for 2009 was ￥55Bn, but it is likely to surpass ￥60Bn. Next year’s forecast is￥80Bn. In the first 9 months of this year, sales grew 32% to ￥27.99Bn while net profit rose 30% to ￥2.96Bn