China’s Economy Needs ‘Structural Change,’ Hang Lung Says

Hong Kong property tycoon Ronnie Chan said China’s economy needs “structural change” to encourage consumer spending and help the nation weather the global economic slowdown.

“Structurally, China’s economy must change and it’s changing,” Chan, chairman of Hang Lung Properties Ltd. (101), said in an interview with Bloomberg Television in New York yesterday. “Personal consumption is one area that’s increasing, so in the coming five to 10 years that will be one of the main games.”

China’s economic growth has slowed, prompting the central bank to cut borrowing costs for the first time since 2008 on June 7. Still, the Housing Ministry said this month that China will “steadfastly” retain property curbs including higher down payments and restrictions on the number of homes that buyers can purchase.

The economy “is slowing because China is so integrated with the world,” Chan said. “Europe is not doing well and America is doing okay. As a result, it’s inevitable that China will slow down.”

Cash-strapped Chinese developers are reluctant to buy land after government curbs in place since 2010 to prevent a property bubble tightened credit, draining liquidity. Hang Lung’s cash ratio, a measure of liquidity, was 2.66 at the end of 2011, the second-highest among the 50 biggest Hong Kong-listed builders tracked by Bloomberg. The company is spending more than HK$40 billion ($5.2 billion) building shopping malls in China.

Hang Lung’s shares fell 1.8 percent to HK$25.10 as of 10:20 a.m. in Hong Kong. They have gained 14 percent this year, compared with the 3.8 percent advance in the Hang Seng Property Index. (HSP) Hang Lung has outperformed the other four Hong Kong-based developers in the gauge.

Selling Bonds

Hang Lung, based in Hong Kong, has opened four malls in Shanghai, Jinan and Shenyang, and will complete at least one property in China every year until at least 2015.

Hong Kong’s third biggest by market value this month sold $500 million of 10-year bonds to investors, its first dollar- denominated debt sale since September 1993.

“I just don’t like the whole financing market in the world today,” Chan said yesterday, without elaborating. “I want to make sure we have some longer term money.”

The developer this year restarted sales of its Long Beach apartment projects in Hong Kong, after a halt of more than 12 months. The sales brought in HK$850 million for Hang Lung, according to a report by analysts including Venant Chiang at Jefferies Hong Kong Ltd.

“Prices are very good,” Chan said. “We’re selling at 50 percent higher than the last time we sold or close to it so why not.”

To contact the reporters on this story: Deirdre Bolton in New York at dbolton@bloomberg.net; Kelvin Wong in Hong Kong at kwong40@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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