Exclusive: China authorities ask Ping An to take controlling stake in Country Garden

Chinese authorities have reportedly asked Ping An Insurance Group to acquire a controlling stake in Country Garden, the largest private property developer in China. The State Council, led by Premier Li Qiang, has instructed the local government of Guangdong province, where both companies are based, to facilitate the rescue. However, Ping An has denied these reports, stating that they have not been approached by the government and categorically denying any involvement in taking over Country Garden. The insurer’s shares have experienced a significant decline in value, while Country Garden’s shares have surged. This potential rescue by Ping An would be a significant intervention by authorities to support the struggling property sector, which accounts for a quarter of China’s economic activity. Analysts believe that such a move could have a positive impact on the property and capital markets, boosting confidence among home buyers and investors. The authorities are keen to mitigate any risks posed by Country Garden’s liquidity problems and prevent them from affecting the wider economy. While Ping An is being asked to take a stake of more than 50% in Country Garden, negotiations are still ongoing, and the insurer will have some leeway to negotiate the terms of the deal. Talks between Ping An and the Guangdong local government have been taking place since September. The discussions are being led by officials from the People’s Bank of China and the National Financial Regulatory Administration. Chinese authorities are eager to use this proposed takeover as a template for resolving the financial difficulties of other troubled developers. They want Ping An to inject capital in stages to address Country Garden’s liquidity problems. Country Garden has already missed a deadline to pay a coupon and is considered to be in default on its offshore bonds. The company has expressed its inability to meet all of its offshore debt obligations and hopes to find a comprehensive solution to its difficulties. The authorities are also keen to resolve Country Garden’s liquidity problems within Guangdong, and Ping An is seen as a suitable candidate due to its location and previous involvement with the company. While a state-engineered takeover of one company by another is not uncommon in China, it has not been seen in the property sector since measures were introduced in 2020 to address the industry’s high debt levels. However, recent developments indicate that the government is willing to play a more significant role in supporting troubled developers. Ping An has previously participated in state-guided aid for other companies and has experience in restructuring debt. Country Garden has substantial liabilities and numerous projects under development nationwide. The potential rescue by Ping An is seen as a crucial step in stabilizing the property sector and preventing a broader financial crisis.