Ping An Poise To Take Over Country Garden

People familiar with the said plan claimed that Chinese authorities have asked Ping An Insurance Group to take a controlling stake in embattled Country Garden,  the nation's biggest private property developer.

China's State Council, which is headed by Premier Li Qiang, has instructed the local government of Guangdong province, where both companies are based, to help arrange a rescue of Country Garden by Ping An. A state-engineered rescue of Country Garden by Ping An would be one of the most significant interventions to date by authorities to support the cash-squeezed and highly indebted property sector, which accounts for one-quarter of China's economic activity and has sparked fears of a broader financial crisis.

Authorities are keen that any risks posed by Country Garden's liquidity problems should not spill over to the wider economy. While in China companies can rarely ignore a request from the central government, Ping An has been asked to come up with details of the plan and will have leeway to negotiate terms of any deal.

Talks between authorities and core Ping An leaders began in late August and are still at an early stage. Ping An has been asked to conduct due diligence on Country Garden. Discussions between Ping An and authorities are being led by People's Bank of China (PBOC), which is the central bank, and include Country Garden. The National Financial Regulatory Administration (NFRA) is also involved in the talks.

Authorities want Ping An to take a stake of more than 50%. Country Garden's largest shareholder with a stake of about 52% is Yang Huiyan, chairperson and daughter of a co-founder. If Ping An were to become Country Garden's controlling shareholder, authorities would like it to inject capital in stages to ease the developer's liquidity problems.

Authorities are keen for the Country Garden's liquidity problems to be resolved within Guangdong. Ping An was a natural choice because it is based in Guangdong and has been a major Country Garden shareholder, according to two of the sources.

A state-engineered takeover of one company by another is not without precedent in China. But there has not been one in the property sector since Beijing flagged measures in 2020 to tackle the industry's very high debt levels, triggering a liquidity crunch.

Although many other Chinese property developers, including giant China Evergrande have defaulted on their debt, policy steps have mostly concentrated on lowering mortgage rates and relaxing rules so that it is easier for people to buy homes.