Analysis on Financing Channels of Real Estate Enterprises in China: Greenland Holdings and Vanke

Abstract

After a long period of prosperity, the real estate market in China is over the hill. With real estate corporations’ constant profits falling, banks take strong actions to keep the quality of bank loans. At the same time, the government implements policies regarding deleverage in the real estate industry, e.g., 3 Red Lines Policy. Consequently, it is crucial for real estate enterprises to reform their liabilities structure by adopting a variety of financing channels. Greenland and Vanke are leading enterprises in the Chinese real estate sector and are both listed in China. This paper intends to explore the status quo of current real estate financing channels through comparison of financing channels employed by these two giants. Based on the annual financial statements of 2020 and 2021, both Greenland and Vanke adopt traditional financing channels, that is, bank loan, bond, and equity, in which bank loan accounts for the largest proportion. However, the new financing scheme, REITs, which can relieve high asset-liability ratio is skipped over. Accordingly, this study took a look into possible reasons of choices made by these two enterprises. These results offer some suggestions in regard of the future development of financing channels for the real estate industry.